TCS on Sale of Goods – Sec 206C(1H)
The Finance Act, 2020 has introduced the new section 206C(1H) of the Income Tax Act, 1961 for Tax Collected at Source on sale of goods. The said provisions are applicable from 01.10.2020.
What is TCS?
Tax Collected at Source (TCS) are provisions under the Income Tax Act for collecting tax at source on certain transactions.
TDS vs TCS
|Tax Deducted at Source||Tax Collected at Source|
|One is required to deduct the amount from payments made for certain transactions.||One is required to collect additional amounts along with consideration for certain transactions.|
|Eg. TDS @ 1% / 2% is deductible on contractual payments.||Eg. TCS @ 1% is collectible on scrap sales.|
|A has incurred Jobwork Expense of Rs. 1.50 lacs. A need to deduct TDS of 2% and will make payment of only Rs. 1.47 lacs to the supplier.||A has made scrap sale of Rs. 2,00,000/-. A need to collect Rs. 2,02,000/- from the purchaser of scrap.|
Such amount of TCS is considered as payment of Income Tax and deductible from total income tax liability of purchaser at the time of filing of return of income. (similar as TDS).
Applicable to whom?
- Applicable to all the sellers selling goods.
- The term ‘seller’ has been defined in the Act. Seller means a person whose total sales, turnover or gross receipts from the business carried on by him exceeds Rs. 10 crores during the financial year immediately preceding financial year.
- Accordingly, all the sellers having sales/turnover/gross receipts from business exceeding Rs. 10 Crore in the year 2019-20 will be required to collect TCS in the year 2020-21.
- If any person has turnover below Rs. 10 Crore during the immediately preceding year then these provisions are not applicable. That means the applicability of provision will have to be checked every year.
- Applicable on sale of all goods except the export of goods and goods already covered under other provisions of TCS.
- TCS provisions are applicable if the value or aggregate value of sales consideration exceeds Rs. 50 lacs during the year.
- TCS is applicable to the amount received in excess of Rs. 50 lacs.
- TCS provisions are applicable at the time of receipt of consideration.
Rate of TCS
- TCS Rate will be 0.1 % if the buyer furnishes the PAN/Adhaar (Reduced to 0.075% up to 31.3.2021).
- TCS Rate will be 1% if the buyer does not furnish PAN/Adhaar (Reduced to 0.75% up to 31.3.2021).
Will it be applicable to all the buyers?
NO. If the buyer is any of the following person then TCS provisions u/s 206C(1H) are not applicable.
- Central Government, State Government, an Embassy, a High Commission, Consulate, and the trade representation of foreign states.
- Local Authority
- Person importing goods
- Any other person as notified by the Government.
TCS Payment & Return
- TCS collected needs to be paid within 7 days of the next month.
- Every tax collector shall submit quarterly TCS return i.e., Form 27EQ in respect of the tax collected by him in a particular quarter.
- The due date of quarterly return is as under:
Matching of TCS on Purchases
- TCS will also be collected on purchases by the respective seller.
- Such TCS will be reflected in Form 26AS for the year on the filing of TCS return by the seller.
- Matching of TCS collected on purchases need to be made with TCS reflected in the Form 26AS. In the case of difference, need to take follow up with the seller.
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