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TCS on sale of goods- Section 206C(1H) of Income Tax Act

CA ALEXANDAR GAZI 
on 10 July 2020

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Section 206C (1H): TCS under Income Tax is now applicable on sale of all types of goods

1. Every seller of goods shall collect TCS @0.1% from buyer. Where buyer can’t provide PAN or Aadhaar Number to the seller TCS shall be collected @1% instead of 0.1%.

Section 206C(1H) shall come into effect on and from 01.10.2020

Due to Covid-19 pandemic TCS rate has been reduced by 25% and shall remain effective for a period from 14.05.2020 to 31.03.2021. Therefore, from 01.10.2020 to 31.03.2021 the rate will be 0.75%. TCS rate of 1% shall not be reduced because the higher rate is for non-furnishing of PAN or Aadhaar.

  • But where specific TCS rates have been prescribed under other subsections of section 206C in respect of sales of certain goods, the subsection 1H of section 206C shall not apply in those cases. (See para no. 5).
  • TCS shall not be collected under this section in respect of export (out of India) of goods.

2. Conditions:

TCS on sale of goods- Section 206C(1H)

Following conditions have to be satisfied to apply section 206C (1H):

  1. TCS shall be collected from those buyers to whom goods are sold for an aggregate value exceeding fifty lakhs rupees during the financial year.
  2. TCS shall be collected on that portion of sale consideration that exceeds fifty lakhs rupees.
  3. Sellers whose total sales, gross receipts or turnover exceed rupees ten crore during the financial year immediately preceding the financial year in which sale of goods is carried out, is liable to collect TCS.
  4. Where buyer is liable to deduct TDS under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount, the seller in such case is not entitled to collect TCS under this section.

3. When TCS shall be collected by seller:

On fulfilling above mentioned conditions, TCS shall be collected by the seller at the time of receipt of sale consideration from buyer.

My personal opinion: For practical convenience, the amount of TCS @0.1% shall be added to sales invoice. The seller should not add TCS in the sales invoice starting from a financial year. At the point where sales value is crossing fifty lakh rupees in the financial year to a particular customer then the amount of TCS shall be added in the invoice issued in name of that very customer.

Example:

Rs.
Sales of LED lamps (100 Pcs @ Rs. 100 each) 10,000.00
Add: CGST @6% 600.00
Add: SGST @6% 600.00
11,200.00
TCS@0.1% on Rs. 10,000/- 10.00
11,210.00

4. Definition of buyer for the purpose of this section:

Buyer means purchaser of any goods but does not include-

(a) Central Government, (b) State Government, (c) A High Commission, legation, commission, consulate and trade representation of a foreign state, (d) A local authority such as Gram Panchayat, Municipality, Municipal Corporation, District Board and Cantonment Board (e) 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.

5. Where section 206C(1H) is not applicable

Serial Number

Section

Description of Goods

TCS Rate

Reduced Rate

From 14.05.2020 to 31.03.2021

(Due to COVID-19)

TCS Rate for non- furnishing of PAN/Aadhaar

(Higher of twice the normal rate or 5%)

Who can Collect TCS

1

206C(1)

Alcoholic Liquor for human consumption

1%

0.75%

5%

Seller

2

206C(1)

Tendu Leaves

5%

3.75%

10%

Seller

3

206C(1)

Timber obtained under a forest lease

2.5%

1.875%

5%

Seller

4

206C(1)

Timber obtained by any other mode

2.5%

1.875%

5%

Seller

5

206C(1)

Any other forest produce

1%

0.75%

5%

Seller

6

206C(1)

Scrap

1%

0.75%

5%

Seller

7

206C(1)

Minerals being coal, lignite and iron ore

1%

0.75%

5%

Seller

8

206C(1F)

Sale of a motor vehicle > Rs. 10 Lakh

1%

0.75%

5%

Seller

9

206C(1C)(i)

Any parking lot is granted on contract, lease, license, etc.

2%

1.5%

5%

Lessor or Licensor

10

206C(1C)(ii)

Any Toll Plaza is granted on contract, lease, license, etc.

2%

1.5%

5%

Lessor or Licensor

11

206C(1C)(iii)

Any mining and quarrying is granted on contract, lease or license, etc. except mining or quarrying of mineral oil

2%

1.5%

5%

Lessor or Licensor

12

206C(1G)(a)

W.E.F.: 01.10.2020

For remittances out of India for more than seven lakh rupees by a single person in a financial year under the LRS of the RBI.

Note: Section 206C(1G)(a) shall not be applicable where the amount being remitted is for a purpose of purchase of overseas tour programme package. . Instead section 206C(1G)(b) shall be applicable.

5%

Example:

Remittances Rs. 8 Lakh

TCS =

5% of (8 L-7 L)

= Rs. 5, 000/-

Rate is 0.5% in case the amount being remitted is out of loan obtained from bank or other financial institution for pursuing any education.

N.A.

10%

5%

Authorised dealer who has been authorised by the RBI under the FEMA, 1999

13

206C(1G)(b)

W.E.F.:

01.10.2020

Overseas tour programme package

5%

N.A.

10%

Seller of an overseas tour program package

 

*** In some cases rates are subject to surcharge and health and education cess where purchaser or the licensee is a foreign company or non-resident firm, co-operative society or non-resident individual/HUF/AOP/BOI.

Notes on Para 5 (For Serial no. 1 to 7)

  1. No TCS shall be collected from resident buyer who purchases goods for the purposes of manufacturing, processing or producing any article or thing (or for the purpose of generation of power) and not for the purpose of trading and buyer gives a declaration in duplicate in Form 27C to the seller.
  2. Scrap: Was and scrap arising from manufacturing or mechanical working of materials which is not usable as such shall be considered as scrap. Therefore, as an example, waste or scrap arising from newspapers or old machinery scrapped are not treated as scrap for the purpose of section 206C(1).
  3. GGenerally retailers need not collect TCS because his customers purchase for personal consumption. TCS shall be required to be collected where buyers purchase goods for any purpose other than personal consumption.
  4. Seller means all types of assesse including central Govt., State Govt., Local Authority, corporation, etc. except individual and HUF. But where a seller is Individual or HUF and his/its books of accounts are required to be audited u/s 44AB(a) or 44AB(b) during the financial year immediately preceding the financial year in which goods are sold, then TCS is required to be collected by such Individual/HUF.
  5. Buyer does not include Public Sector Company, Central Government, State Government, A High Commission, legation, commission, consulate and trade representation of a foreign state, club and a buyer in retail sale of such goods purchased by him for personal consumption.
 

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Category Income Tax
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