FAQs On Sec 206C (1H)- A Tabular Presentation

CA Rohit kapoor | Last updated: 03 October 2020

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This article clarifies the provisions of Section 206C(1H) concerning Tax Collected at Source (TCS) on the sale of goods. It outlines who is liable to collect TCS, typically businesses with a turnover exceeding Rs. 10 crores, and from whom it should be collected, specifically buyers when the sale consideration exceeds Rs. 50 lakhs in a financial year. The article also details the timing of TCS collection, the definition of 'goods', and clarifies applicability to various transactions like software, jewellery, and motor vehicles, while also noting exemptions for securities, commodities, and inter-branch transfers.

S.NO	FAQ	Answer
1.	Who is Liable?	Tax is required to be collected by a person carrying on business whose total sales, gross receipts, or turnover exceeds Rs. 10 crores in the financial year immediately preceding the financial year of sale. Author Notes: Sale includes the sale of goods as well as revenue from services to decide about who is liable.
2.	From whom tax shall be collected?	Tax is required to be collected from a buyer if the following conditions are satisfied: a) There is Sale of Goods b) Seller receives an amount of consideration for the sale of goods exceeding Rs. 50 lakhs during any previous year Author Notes: Sec 206C(1H) is applicable only to the sale of goods and thus not applicable to Service Providers. Consideration includes advances received for the sale of Goods. Exports and Imports have been exempted from the applicability of this section. Further, no TCS liability if tax is deducted or collected under any other provision of the Act.
3.	Timing of Collection of TCS?	Tax should be collected at the time of receipt of the amount from the buyer if the value of sale consideration received in a previous year exceeds Rs. 50 lakhs Author Notes: A lot of Doubts have been raised on this issue. Please note only the amount of consideration received after 01.10.2020 would attract TCS liability. The amount of consideration could be advance also. Another point that merits consideration is that amount received before 30.09.2020 would also be considered for the threshold of Rs. 50 lakhs although TCS would be collected only from the amount received after 01.10.2020 Ex: The amount received during FY 20-21 is Rs. 1 crore although Rs. 55 lakhs were received prior to 30.09.2020. Now although Rs. 45 lakhs are received post 01.10.2020 but still TCS liability would be on Rs. 45 Lakhs
4.	What is the Definition of Goods?	Sale of Goods Act, 1930 is a specific statute that deals with the ‘sale of goods’ whereas the CGST Act, 2017 deals with tax on ‘supply of goods’. Thus, the definition of term ‘goods’ can be referred to from the Sale of Goods Act, 1930 for the purpose of Section 206C(1H). Author Notes: It should be noted that Goods include only movable property. Consequently, the TCS shall not be collected from the sale of immovable property by a developer.
5.	Whether Transactions in securities through RSE is liable to TCS	The CBDT has clarified that provisions of this section shall not be applicable in relation to transactions in securities (and commodities) which are traded through recognized stock exchanges
6.	TCS on Motor vehicle?	There is a specific provision in Section 206C(1F) for the collection of tax on the sale of a motor vehicle. Under this provision, the tax shall be collected from every buyer who pays any amount as consideration for the purchase of a motor vehicle of value exceeding Rs. 10 lakhs Vide Circular No. 22/2016, dated 8-6-2016, the CBDT has clarified that the provisions of Section 206C(1F) will not apply to the sale of motor vehicles by manufacturers to dealers/distributors. Author Notes: B2C would attract Sec 206(1F) where the value of MV exceeds Rs. 10 Lakhs and 206C( 1H) would apply to B2B transaction
7.	TCS on Transaction in electricity?	Electricity is a GOOD as per Judicial Precedents. CBDT has clarified that TCS is required to be collected where electricity is purchased directly from electricity generation companies and not through power exchanges.
8.	TCS on sale of Software	The Supreme Court in its landmark decision of Tata Consultancy Services v. the State of A.P [2004] 141 Taxman 132 (SC) held that Canned software (off the shelf computer software) are 'goods' and as such assessable to sales tax. If the sale of software has been treated as a sale of goods then the seller shall be liable to collect TCS subject to the fulfillment of other conditions of this provision.
9.	TCS on sale of Jewellery?	Yes, if other conditions are also fulfilled
10.	TCS on the resale of Goods?	Business connection has to be seen i.e. if a person re-selling falls within the definition of sellers, then he will be liable to collect.
11.	The additional out-of-pocket expenses to be included?	If they form part of the sales invoice then TCS would be collected as it forms part of sales consideration. If a separate invoice is issued then not liable.
12.	Rate of TCS?	The tax shall be collected by the seller of goods at the rate of 0.1% of the sale consideration exceeding Rs. 50 lakhs if the buyer has furnished his PAN or Aadhaar, otherwise, the tax shall be collected at the rate of 1%. Author Notes: TCS for the specified receipts have been reduced by 25% for the period from 14-05-2020 to 31-03-2021 vide The Taxation and Other Laws (Relaxation and Amendment of certain provisions) Act, 2020. Hence, the rate of TCS on sale of goods shall be 0.075% till 31-03-2021
13.	Whether TCS on value including GST?	Author Notes: It has been mentioned that TCS is on a receipt basis and receipt would be inclusive of GST and thus TCS is required to be collected on the sale consideration inclusive of GST
14.	TCS on inter branch transfers?	The condition of sale is not fulfilled in the context of branch transfer. Therefore, the provisions of this section shall not apply in the case of branch transfers.
15.	If the buyer has multiple units?	If different units of buyer are under the same PAN or Aadhaar number, the amount received from all such units shall be aggregated to compute the limit of Rs. 50 Lakhs.

FAQ :

A person carrying on business is liable to collect TCS if their total sales, gross receipts, or turnover exceeded Rs. 10 crores in the financial year immediately preceding the financial year of sale.

Tax is collected from a buyer if there is a sale of goods and the seller receives an amount of consideration exceeding Rs. 50 lakhs during any previous year.

TCS should be collected at the time of receipt of the amount from the buyer if the value of sale consideration received in a previous year exceeds Rs. 50 lakhs. Only amounts received after 1st October 2020 attract TCS liability.

Yes, transactions in securities and commodities traded through recognised stock exchanges, exports, imports, and inter-branch transfers are exempted. TCS is also not applicable if tax is deducted or collected under any other provision of the Act.

The rate is 0.1% of the sale consideration exceeding Rs. 50 lakhs if the buyer provides their PAN or Aadhaar. Otherwise, the rate is 1%. For the period 14-05-2020 to 31-03-2021, the rate was reduced to 0.075%.

For motor vehicles, Section 206C(1F) has a specific provision. Section 206C(1H) may apply to B2B transactions of motor vehicles. For software, if canned software is treated as a sale of goods, TCS liability applies subject to other conditions.