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Section 206C(1H) - New Provisions and its applicability w.e.f 01.10.2020

Saloni Gandhi 
Updated on 29 January 2021

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With effect from 01-10-2020, the Finance Act, 2020 inserted sub-section (1H) in Section 206C which requires a seller to collect tax at source from the buyer for the amount received as consideration for the sale of goods if it exceeds Rs. 50 lakhs in any previous year.  

Section 206C(1H) provides as follows

'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”.

Important points to be considered

  • TCS is on sale of goods.
  • 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.
  • The provision applies on receipt of sale consideration, and shall not apply on any sale consideration received before 01-10-2020. Consequently, it would apply on all sale consideration (including advance received for sale) received on or after 01-10-2020 even if the sale was carried out before 01-10-2020.
  • It is mandatory for the seller to be carrying out business in the preceding previous year. Person(s) who have incorporated business during the current year is not liable for TCS under this section. Kindly note that FY 2019-2020 is the first previous year to check the applicability.
  • Exclusions from the limit of sale of goods of Rs.50 lakhs :
  • The tax shall not be collected under this provision if the goods are sold by way of export out of India
  • Goods covered by sub section 1 of section 206C which are:
  • Alcoholic liquor for human consumption,
  • Tendu Leaves,
  • Timber obtained under forest lease or any other mode
  • Scrap,
  • Minerals, being coal or lignite or iron ore
  • Any other forest produce
  • Goods covered by 206C(1F) i.e. TCS on sale of Motor Vehicle exceeding Rs.10 Lakhs
  • Goods covered by 206C(1G) i.e.
  • Liberalized Remittance Scheme
  • Goods sold by Central/State Government
  • Goods sold by Local Authority
  • 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.
Section 206C(1H) - New Provisions and its applicability w.e.f  01.10.2020

Different situations for understanding the above mentioned provisions

Sale of goods excluding services value is not exceeding 50 Lakhs

Case

Applicability of TCS

Reason

Advance received on 25.09.2020 for the Sale of Goods of Rs.85 lakhs to be delivered after 01.10.2020

No

The provisions of section 206C(1H) are applicable w.e.f. 01.10.2020 but in the given case, the consideration is received before 01.10.2020

Sale of Goods of Rs.85 lakhs including services supply of Rs.35 lakhs

No

A seller started business in August 2020 & made a sale of Rs. 2 crore to Mr. XYZ

No

Seller is not satisfying turnover limit of Rs.10 crore in the previous year

  • The tax shall not be collected if the tax is deducted or collected under any other provision or buyer falls under the list of persons excluded from the provision for collection of tax.
  • TCS rate for collection is 0.1%.

Basic Rate

Revised Rate for 01.10.2020 to 31.03.2021

Whether PAN/Aadhaar furnished by the buyer

0.1%

0.075%

Yes

1%

1%

No

 

Disclaimer: The contents of this article are for information purposes only and do not constitute as advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability.

 

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