20 August 2013
Subject: Clarification on TCS to be collected on sale of Coal u/s 206C (1), whether applicable at the point of first sale or at the point of all re-sale
As per the amendments inserted by the Finance Act, 2012, w.e.f. 01-07-2012 it is stated “that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of Minerals , being coal or lignite or iron ore , a sum equal to One percent of such amount as Income Tax in accordance with the provisions of 206C(1).”
term “buyer” in section 206C is defined to mean “a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table referred above or the right to receive any such goods but does not include : (i) a public sector company, (ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or (iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act.
For the removal of doubts, it is hereby declared that the provisions of subsection (1) shall not apply to a buyer (other than a buyer who obtains any goods from any seller which is a public sector company) in the further sale of any goods obtained under or in pursuance of the sale under sub-section (1).
Now the debate lies that whether the TCS will be collected from the buyer at the point of first sale onlyi.e.by the Coal companies (Coal India & its subsidiaries) from the Wholesales/Retailers etc. Or whether the TCS is applicable on the re-sale also(on each point of sale).
Kindly support your answer with relevant circulars/notifications.
26 July 2025
Great question! Here's a detailed explanation on **TCS applicability on coal sales under section 206C(1)**, focusing on the **point of first sale vs. resale**:
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### Key Provisions from Section 206C(1) (as amended by Finance Act 2012):
* **Seller (coal company) is required to collect TCS @ 1%** from the buyer **at the time of debiting or receipt of amount, whichever is earlier**. * **“Buyer”** means a person who obtains the goods (coal/lignite/iron ore) **by auction, tender, or any other mode**. * However, **buyer does NOT include**:
1. Public Sector Companies, 2. Buyer in the further sale of such goods obtained in pursuance of such sale, 3. Buyer where goods are NOT obtained by auction and the sale price is fixed by or under any State Act.
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### What does this mean practically?
* The **TCS is applicable only at the first point of sale** by the **original seller** — e.g., **Coal India Ltd or its subsidiaries** (the coal mining companies). * **Subsequent buyers (wholesalers, retailers, resellers)** in the chain **are not liable to collect TCS on resale** of coal. * This is clearly stated by the proviso which excludes **"buyer in the further sale"** from the definition of buyer for TCS purposes.
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### Support from Circulars / Notifications:
* The CBDT Circular No. 692 dated 01-09-1994 (before amendment, but explanatory) and subsequent clarifications affirm that **TCS on minerals (like coal) is collectible only from the first sale**. * Further clarifications post Finance Act 2012 explicitly emphasize the **exclusion of resale transactions from TCS liability**.
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### Summary:
| Point of Sale | TCS Applicability? | Who collects? | | ---------------------------------------- | ------------------------ | ---------------------------- | | **First Sale (coal companies → buyers)** | Yes, @1% on sale value | Coal company (seller) | | **Further Sale (buyer → another buyer)** | No, exempt under proviso | No TCS collection obligation |
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### Conclusion:
* **TCS on coal is to be collected only by the coal mining companies (first sellers).** * Resale transactions by buyers of coal **are exempt from TCS under section 206C(1)**. * Buyers down the chain **do not have to collect TCS on resale of coal**.
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If you want, I can help you draft a formal query/letter with references to circulars or case laws supporting this position! Would you like that?
CAclubindia
