Under section 206C is the law to levy TCS
The definition of scrap in law is as follows –
Waste or scrap arising from the manufacture or mechanical use of goods which cannot be reused.
question -
My client is a wholesaler of scrap (paper scrap) and will be audited under SEC 44AB from current year 2024-25 under Income Tax Act.
His annual Turnover Rs. 2 Cr
So will he be liable to levy 1% TCS under sec 206C??
Your client, the wholesaler of paper scrap, will be liable to levy 1% TCS under Section 206C.
This is because the TCS provision applies to scrap arising from the manufacture or mechanical use of goods that cannot be reused, which includes paper scrap.
However, it's important to note that TCS will not be applicable if the buyer submits a declaration in Form 27C that the goods will be used for manufacturing, processing, or producing articles or things, or for generating power, and not for trading purposes ¹.
Additionally, since your client's annual turnover exceeds Rs. 2 crores, they will be required to collect TCS at the rate of 1% on the sale of paper scrap .
I THOUGHT THIS SECTION OF TCS LIABLE ON MANUFACTURERS ONLY FOR COLLECTING TCS @ 1%, NOT ON TRADERS.
BEACUASE AS SCRAP DEFINATION SAYS "Waste or scrap arising from the manufacture or mechanical use of goods which cannot be reused"
BUT MY CLIENT PURCHASE SCRAP ON DAILY BASIS FROM LOCAL END USERS. I.E SCRAP PAPERS, GLASS & PLASTIC BOTTLES, ALLUMINIUM SCRAP AND OTHERS
Section 206C(1) requires TCS at 1% on scrap sales regardless of the seller turnover. The Rs 10 crore threshold you may be thinking of is for Section 206C(1H), which covers general goods. Scrap has its own clause and there is no minimum turnover condition for the seller. One exception: if the buyer gives a declaration in Form 27C that the scrap is for manufacturing use and not for resale, TCS collection is exempt. Full breakdown of all 206C categories and rates is in this [TCS guide for Indian businesses](https://taxgarden.in/blog/tcs-tax-collected-at-source-section-206c-guide-india).
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