Finance Act, 2020 has inserted the new provision (Section 206C(1H)) in the Income Tax Act, 1961 which is applicable from 1st October 2020.
The extract of the same is provided as under:
“every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax:”
So, a 206C(1H) has been inserted for collection of tax at source (TCS) and it is applicable from 1st October 2020. Detailed guidelines as below:
Applicability with regards to Taxpayer:
Section 206C(1H) is applicable only if in previous financial year (For present F Y 20-21, previous F Y will be 19-20), the total sales / gross receipts / turnover from the business excess Rs. 10 Crores. So if turnover in the previous financial year is equal to or less than Rs. 10 Cr then this provision is not applicable.
Applicability with regards to Transaction
Following are the exceptions wherein Section 206C(1H) will not be applicable even if turnover in the previous financial year has crossed Rs. 10 Cr.
- With respect to the individual buyer with whom the sale of goods doesn’t exceeds Rs. 50 Lacs in the current financial year.
- If the buyer is liable to deduct TDS / TCS under any other provisions of the Income Tax Act and has deducted such amount.
- If buyer is Central Govt., State Govt., an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State, a local authority as defined in the Explanation to clause (20) of section 10.
- a person importing goods into India
- any other person as the Central Government may, by notification in the Official Gazette
Applicability with regards to Business
Following are the exceptions wherein Section 206C(1H) will not be applicable even if above conditions are satisfied:
- Service provider (As the provision exclusively deals with ‘goods’ and not services)
- Goods exported outside India
- Following goods are not covered u/s 206C(1H)
- 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) etc.
The reason for excluding above goods is simple that they are already liable for TCS under sub section (1), (1C), (1F), (1G) of Section 206C of the Act.
Threshold limit of Sales transactions:
As explained above, even if turnover has exceeded Rs. 10 Cr in previous financial year, Section 206C(1H) would not applicable for each sales transactions in the current financial year.
This provision will be applicable only if sales with the single buyer exceeds Rs. 50 Lacs in the current year and TCS will be applicable on the sales amount in excess of Rs. 50 Lacs.
Rate of TCS:
TCS would be 0.1% of the sales value. However, there is rebate of 25% with respect to TDS and TDS due to Covid 19, therefore for F Y 20-21, the effective rate would be 0.075%.
However, if buyer doesn’t have Aadhar / PAN then the rate of TCS would be 1% instead of 0.1%.
Value of Goods:
It has been mentioned that TCS will be applicable on the ‘sale consideration’ exceeding Rs. 50 Lacs.
Sales consideration would not mean only the sales value and will also include freight, insurance etc. if the same has been mentioned on the invoice.
CBDT has clarified that no separate adjustments with respect to GST etc is to be done. So it would mean that TCS is to be collected on the value including GST.
When TCS is to be collected:
TCS from the buyer is required to collect at the time of receipt of sale consideration.
When TCS is to be deposited with the Govt.
TCS is to be deposited up to 7th of the Next month (for March also unlike in TDS). i.e. for April – 7th May etc.
When TCS return is to be filed with the Govt.
TCS return is to be filed up to 15th of the month succeeding the quarter. i.e. for April to June – 15th July and so on.
Disclaimer: This write up is not intended to be a professional advice to anyone, therefore neither the Author nor the Organization accepts any responsibility whatsoever and hence no liability can arise for any losses, claims or due to the contents of this write up.