TCS: Whether purchases by the buyer should be more than Rs. 50 Lakh for TCS applicability u/s 206C(1H)?

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TCS: Whether purchases by the buyer should be more than Rs. 50 Lakh for TCS applicability u/s 206C(1H)?

The question arises whether the turnover of the buyer from the seller needs to exceed Rs. 50 Lakh for complying with the TCS provisions?

Rather the queries where I have been asked as to the applicability of TCS in following three different situations:

  1. Whether TCS is required when both the amount of sale as well as receipt of money against sale consideration exceeds Rs. 50 lakhs during the relevant financial year? Or
  2. Whether TCS is applicable only when the amount of sale exceeds Rs. 50 lakhs irrespective of the amount of sale consideration received during the previous year? or
  3. Whether TCS will be applicable when the receipt of money exceeds Rs.50 lakhs and is not at all dependent on the amount of sale done during the year?

To cover above query, one needs to revisit Section 206C (1H)

The relevant part of Section 206C (1H) reads as under:

 

“Every person, being a seller, who receives a ny amount as consideration for s ale 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”.

 

 

(a)  “buyer” means a person who purchases any goods, but does not include,—

(A) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or

(B) a local authority as defined in the Explanation to clause (20) of section 10; or

(C) a person importing goods into India or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein;

 

(b) “seller” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out, not being a person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

 

From above provisions, one can draw following conclusions:

  1. For applicability to the seller, “sales turnover or gross receipts” of the last year is important.
  2. In case of a buyer, the word “who receives any amount as consideration…..” used prior to“sale of any goods of the value…”
  3. In short, in case of buyer, it is not sale but the “Receipt of money..” which is intended to make the buyer liable for TCS.
  4. Section 206C(1H) in the initial para itself is not talking about “sale” buyers. It is only referring to receipt of money against sale.
  5. In short, if the receipt of money against sale is exceeding Rs. 50 Lakh, TCS will be applicable.
  6. In other words, even if the purchase by the buyer in any year is less than Rs. 50 Lakh but receipt is more than Rs. 50 Lakh then the TCS will be applicable.
  7. This has been clarified by FAQ issued by the CBDT that the receipt of money against sale prior to 01/10/2020 will also be subject to TCS. It means that the sale may not be there in subsequent years and book debts may be there from such persons. The receipt of money if exceeds Rs. 50 Lakh, TCS will apply in all such cases.

3 Comments

  1. Thank you Sir..
    Kindly clarify, if April to Sept total Sales 75 Laksh. Amount received up to sept 45 lakhs. My doubt is sellar wants to collect TCS from invoice is correct or not. Then what abount balance 30 lakshs?

    Reply
  2. November 10, 2020
    Naresh Jakhotia

    Out of bakance of Rs. 30 Lakh, only Rs 25Lakh would be liable for TCS

    Reply
  3. November 11, 2020
    Bhanushali

    Please clarify me that is it right that
    No this law or any term of this law is apply if there is cut of TDS in transaction

    Reply

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