Clarification on TCS on sale of goods

Clarification on tcs on sale of goods
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Clarification on TCS on sale of goods

Applicability on transactions with various Exchanges

Section 206C(1H) shall not be applicable on: –

  • Securities or commodities traded on recognized stock exchanges.
  • Transactions in electricity and renewal energy certificates traded through recognized power exchanges.

You may also like: Section 194Q – TDS on Purchase of Goods (w.e.f. 1st July 2021) and Difference between Section 194Q and Section 206C(1H)

Threshold Limit Calculation

If the sales are made before 1st October 2020 and payment/ receipts are received after 1st October 2020 then also TCS has to be collected on such receipts. This means that TCS will have to be collected on the outstanding balance of sundry debtors is on 30th September 2020.

For computing the limit of 50 Lakhs per buyer, the receipts have to be considered from 1st April 2020. It means that if the seller has already received more than 50 Lakhs from a buyer before 1st October 2020, then TCS shall be applicable on all receipts received by the seller after 1st October 2020.

Adjustment of Sales return, discount or Indirect Taxes

There will be no adjustment for the amount of Sales return, discount or GST. It means that whatever receipts the seller is receiving the TCS has to be paid to the Government.

Applicability on Motor Vehicles

Many queries were raised on Applicability on Motor Vehicles. The following clarifications are issued: –

For the sale of Motor Vehicle valuing less than Rs. 10 Lakh: – If the sale is made for more than 50 Lakhs then the provisions of Section 206C(1H) will apply.

For the sale of Motor Vehicle valuing more than Rs. 10 Lakh: – In this case, the provisions of Section 206C(1F) will apply and not Section 206C(1H).

This will create problems for car dealers as they will have to comply with two provisions of income tax on their sales.

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About CA Mehul Gupta 30 Articles
Chartered Accountant in practice, Certified GST Practitioner & Commerce Graduate. He is mainly engaged in the practice of Direct taxes, GST, International taxation, & assurance services. A visiting faculty in the Faridabad Branch of ICAI.

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