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TCS Under Section 206C(1H) on Sale of Goods: Simple & Short Analysis
Section 206C(1H) as amended finally reads as under:
(1H) 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:
Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words “five per cent”, the words “one per cent” had been substituted:
Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.
Explanation.—For the purposes of this sub-section,—
(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.
For TCS, collection duty is casted not on payer but on payee. The liability is on seller who is recipient of money and not payer who is the payer in the transactions. That why is Tax COLLECTION at Source (TCS) and not Tax DEDUCTION at Source (TDS.
Every seller needs to collect tax at source from the buyer if it receives consideration (including taxes) towards sale of goods in excess of Rs. 50 Lac in any financial year.
Important things to note here is the “turnover” of the seller and “receipts” in the case of buyer.
The turnover for the seller needs to be taken for the immediately preceding financial year but in case of the buyer whereas receipts in any financial year by the seller is required be ascertained.
The seller is liable to collect tax at 0.075% till 31/03/2020 and from FY 2020-21, the rate will be 0.10%. In case, the buyer does not provide, PAN & Aadhar No. rate of tax collection would be 1%. There is no concession of 25% in case the seller don’t have the PAN/Aadhar and TCS rate is 1% only.
TCS liability triggers when the receipt from the buyer exceeds Rs. 50Lac. Triggers point is “receipt of consideration” and not the turnover of the buyer. The TCS so collected has to be deposited with the government within 7th of the next month. Return of TCS is required to be filed by within 15th day of the quarter ending & in case of March, the due date is 15th May immediately after the end of the relevant FY.
TCS is required to be to be collected on amount received above Rs. 50 Lakh. The consideration of Rs. 50 Lakh is after including TCS & Other charges. There are some important things which every businessmen must know.
1. Tracking the triggers point of Rs. 50 Lakh of receipt from every buyer would be a cumbersome process. It will be seriously affecting the ease of business for small organization wherein limited manpower have to ensure all the compliance.
2. There is no option to make a declaration to the seller that the buyer is using the material purchase in the process of manufacturing as was available in other TCS provisions u/s 206C(1) for timber, coal, etc.
3. TCS liability arises on receipts of consideration towards the sale of goods only. It means the seller has to keep a track whether the amount is received is against sale of goods or against some service part or interest or loan or for other transactions wherein “goods” is not involved. It will be better if separate ledger / control is created for supply of service to make the task easy
4. As the tax is to be collected only consideration received against sale of goods, allocation of every receipts is required to be done in accordance with the provisions.
5. Sales return may not pose serious hurdles in the TCS provisions if the seller is opting to pay the TCS on receipt basis.
6. The provision of section 206C (1H) is applicable w.e.f 01.10.2020 & the liability to collect tax is linked with the “receipts of consideration” towards sale of goods. If any receipts is from the book debts outstanding as on 30.09.2020 then also it will be subject to TCS. It will be so even if TCS provision was not in force at the time of sale.