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Applicability of Section 206(1H) on Import & Export transactions - NOT APPLICABLE

Applicability Date of Section 206(1H) - 01st October, 2020

Insertion of sub- section (1H) under section 206 which governs collection of tax at source in the Finance bill, 2020 has put an immense burden of compliance on the Industries & Trade (Seller) having turnover more than 10 Crore to collect TCS @ 0.1%. (or @1% from buyers who do not produce PAN No. as per proviso to this section)

In the proposed Finance Bill it was not clarified whether such section covers Import & Export transaction or not. In that context Exporters were under highly dilemma because of incremental cost of 1% due to non-availability of PAN of foreign importers and therefore this article is put for clarity regarding such Question;

Relevant extract of Section 206(1H) of the Finance Act, 2020 passed on 27th March, 2020 is as under;

Section 206(1H): Applicability of TCS on Export and Import of goods

95. In section 206C of the Income-tax Act with effect from the 1st day of October, 2020,.....

.......Section 206(1H) Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax.

Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words 'five per cent.', the words 'one per cent.' had been substituted:


Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.

Explanation.- For the purposes of this sub-section,- -

(a) 'buyer' means a person who purchases any goods, but does not include,- -

(A) the Central Government, a State Government, an embassya High Commission, legation, commission, consulate and the trade representation of a foreign State; or

(B) a local authority as defined in the Explanation to clause (20) of section 10; or

(C) a person importing goods into India or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein;

(b) 'seller' means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out, not being a person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.’;


Therefore as per above it is amply clear that the TCS is not applicable and not liable to be deducted and paid on Import & Export of Goods transactions.

Source: Finance Act, 2020 - https://www.incometaxindia.gov.in/Documents/News/Finance-Act-2020.pdf (Relevant Page No. 47 & 48)


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