Applicable Income tax Section 206C (1H)
Effective date of application of this Section: 1st October 2020
Content of the Provision
SELLER of GOODS shall collect from the BUYER at the rate prescribed U/s 206C (1H) if he receives any amount as consideration for sale of goods of the value (or aggregate of such value) exceeding Rs.50 lakh in any previous year.
Important points or definition to be noted.
“Goods” has not been defined in the Income tax act and hence reference is made to Section 2(7) of the Sale of Goods Act, 1930 which defines goods to “mean every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”.
GOODS for the purpose of this section shall means all goods except the below goods which are covered by other provisions of section 206C.
- Alcoholic Liquor for human consumption
- Tendu leaves
- Timber obtained under a forest lease
- Timber obtained by any mode other than under a forest lease
- Any other forest produce not being timber or tendu leaves
- Minerals, being coal or lignite or iron ore
- Motor vehicle (if value exceeds INR 10 Lakhs)
- Export of goods out of India will also not covered here.
- SELLER OF GOODS
Who is Seller?
Seller means a person whose total SALES, GROSS RECEIPTS OR TUNOVER from the business carried on by him exceeds Rs.1000 lakhs during the financial year immediately preceding the financial year in which the sales of goods is carried out.
Seller does not include:
A person as the Central Government may, by notification in the Official Gazette, specify for this purpose.
- BUYER OF GOODS
Who is Buyer?
Buyer means a person who purchases any GOODS comes under the purview of this section but does not include.
a. The Central Government, State Government, an embassy, a High Commission, legation, Commission, Consulate and the trade representation of foreign State or
b. Local authority or
c. A person importing goods into India or
d. Any other person as notified by the Central Government.
- When to Collect Tax
TCS has to be collected by the Seller who receives any amount as consideration for sale of goods of the value (or aggregate value) exceeding Rs.50 lakhs in any previous year.
- Rate of Tax collection
TCS has to be collected at the rate of 0.1% (0.075% during October 1, 2020 and March 31, 2021) of the sales consideration exceeding Rs.50 lakh.
If No PAN/Aadhaar available rate shall be 1%
- Time of TCS collection:
TCS is to be collected at the time of receipt of sales consideration from buyer exceeding Rs.50 lakhs
7. When TCS under this section is not required to be collected:
- If the amount of sale consideration or the aggregate amount of sale consideration during the financial year received by the seller from a buyer does not exceed Rs.50 lakhs
- If the buyer is liable to deduct tax at source under any provisions of the act on the goods purchased by him from the seller.
- If the seller exports goods out of India.
Practical Complication or Problem in dealing in Calculation of TCS
- Whether GST is to be included in amount while calculating value for TCS?
One view is that since the word used is “sale consideration” GST not to be included in the amount for calculation of TCS.
Other View is TCS is applicable on amount received and hence GST also has to be included in the calculation of TCS.
- Whether TCS is applicable on Service Provider?
No it is not applicable to Service provider as the provision says Seller of certain kinds of Goods
- Whether TCS is applicable party wise?
Yes. TCS is applicable only to those customers sales to and receipts from whom is more than 50 lakhs. So monitoring of the sales to each customers and sorting of customers will be an additional job of the compliance team.
- TCS has to be collected at the time of Sales or receipt of consideration?
TCS is applicable on receipt basis. In some cases sales were made during one year and realization would be in the next year, in such cases, more reconciliation part involved between TCS liability with turnover.
- TCS has to be collected for the full amount or the amount which exceeds Rs.50 lakhs?
TCS will be triggered on receipt basis and will be applicable on the sales consideration received after 1st October 2020 and which exceeds Rs. 50 lakhs.
- Whether TCS under this provision can be collected in the invoice?
Though the TCS can be collected through the sales invoice, TCS will be collected only when the actual payment is received by the seller of the goods. As such even though the books of accounts shows TCS liability in actual sense it is not payable.
- What is the position of TCS on advance payment received?
The Seller of goods is mandated to deduct TCS under this section each time the seller receives part of sale consideration in advance.
Author: CA. Remesh Naick V R, FCA