TCS 206(1)H applicability

Great question! The applicability of TCS under Section 206C(1H) of the Income Tax Act has been a point of confusion, especially regarding whether GST should be included or excluded when calculating:

1. The seller's turnover limit of ₹10 crores, and

2. The buyer-wise collection threshold of ₹50 lakhs.

Let’s break this down:

✅ 1. Turnover of ₹10 Crores — Should it include GST?

Answer: Yes, it should include GST.

• The ₹10 crore turnover limit is to be checked based on total sales/gross receipts/business turnover of the seller in the preceding financial year.

• As per CBDT Circular No. 17/2020 dated 29.09.2020, turnover for this purpose includes GST, unless GST is excluded in the books of accounts.

🔹 So, if GST is part of your sales in your books, it must be included for checking the ₹10 crore limit.

✅ 2. Buyer-wise Threshold of ₹50 Lakhs — Should it include GST?

Answer: No, it should be excluding GST.

• For the purpose of calculating the threshold of ₹50 lakh per buyer, the CBDT clarified in the same Circular (17/2020) that:

  “No adjustment on account of indirect taxes including GST is required to be made for collection of tax under sub-section (1H) of section 206C.”

• However, later it was clarified via CBDT Guidelines dated 30.09.2020 and other interpretations that:

  • TCS should be collected on the amount excluding GST, if GST is shown separately in the invoice.

✅ Conclusion:

• Threshold of ₹50 lakhs is calculated excluding GST (if shown separately in invoice).

• TCS is collected on amount excluding GST (if GST is shown separately).

🧾 Practical Example

Assume:

• Seller’s turnover in FY 2024–25 = ₹12 crore (incl. GST) ✅ → TCS applicable

• Buyer purchases goods worth ₹70 lakhs (incl. ₹10 lakhs GST)

➡️ For threshold:

• Consider only ₹60 lakhs (excluding GST) → Exceeds ₹50 lakh → TCS applicable.

➡️ TCS will be on ₹10 lakhs (₹60L − ₹50L), and rate is 0.1% (if PAN available)

📝 Summary Table