TCS mendatory on Scrap Sale

Hi Pradeep,

Yes, TCS at 1% on sale of scrap is mandatory, even for an individual business firm, if certain conditions are met.

✅ Applicability of TCS on Scrap – Section 206C(1) of Income Tax Act:

TCS at 1% is required to be collected by the seller on sale of scrap, if:

1. Seller is engaged in business (including individual proprietorship)

– Yes, even individual firms and proprietors are covered.

2. Scrap is sold (not for personal use of buyer)

3. Seller’s turnover in preceding financial year exceeds ₹1 crore (for business)

– This is as per the applicability of Tax Audit (Sec 44AB) thresholds.

4. Buyer is not exempted (e.g., government, local authority, or buying for personal use)

📌 Definition of Scrap (as per IT Act):

Scrap means waste and scrap arising from manufacturing or mechanical operations, which is not usable as such, and is sold as waste material.

If you are trading or manufacturing and sell such scrap, TCS applies.

🔢 Rate of TCS:

• 1% of the sale value (exclusive of GST)

• Section: 206C(1)

🧾 TCS Compliance:

If TCS is applicable, you must:

• Collect TCS at the time of receipt of sale consideration

• Deposit TCS monthly with the government

• File TCS return in Form 27EQ quarterly

• Issue TCS certificate in Form 27D to the buyer

🔁 Example:

You sold scrap worth ₹2,00,000 (excluding GST):

• TCS to be collected = ₹2,000 (1% of ₹2 lakh)

• You collect ₹2,02,000 from buyer

• Deposit ₹2,000 to the government and file return

❌ Not Applicable If:

• Turnover in preceding FY ≤ ₹1 crore (business)

• Scrap sold is for personal use of buyer

• Buyer is Government or exempt entity