TCS to be collected by a Seller from October 1, 2020, only if Turnover exceeds Rs. 10 crores
Category: TDS/TCS, Posted on: 19/02/2021 , Posted By: Webtel
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In our previous article, we have discussed the overview of the new provisions of TCS added by the Finance Act, 2020 on sale of goods, foreign remittances under liberalized scheme and selling of foreign tour packages. In this article, we are discussing the provision on sale of goods in a simple way to easily understand the new provision.

Section 206C(1H) of Income Tax Act, 1961

This provision came into effect from October 1,2020 and according to it, Seller whose turnover exceeds Rs.10 crores in the preceding financial year, will have to collect and deposit the TCS on receipt of sale consideration more than Rs.50 lakhs from the buyer (limit applicable for each buyer separately) in the current financial year. The rate of TCS will be 0.1% (presently 0.075% till 31st March, 2021).

TCS will not have to be collected if turnover does not exceed Rs.10 crores in the year ended 31st march, 2020. In other words, TCS will be applicable only if turnover of the seller exceeds Rs.10cr otherwise not. TCS will not be collected by the seller before October 1, 2020

TCS will be collected by the seller on receipt basis, for example seller made a sale of Rs.5 crores from 1st April to 30th September, 2020 to one buyer out of which Rs.1 crores was received on or after 1st October, 2020 even then seller have to collect TCS on Rs.1 crores though no supply made on or after 1st October, 2020 because it is tax based on receipt basis.

This provision has come up with many new questions and doubts which need to be resolved. Thus, Webtel Experts have addressed all these queries in their recently published videos.

Some Exceptions to this provision

  1. If the Goods are exported out of India
  2. If goods are already liable to deduct TDS by the buyer (e.g. Job Work, Composite supply etc.)
  3. If the Seller is liable to collect TCS under other clause of section 206C (For e.g. In case of sale of motor vehicle, he shall liable to collect TCS if the value of motor vehicles exceeds Rs.10 lakhs)

Some important points in relation to threshold limit

  1. For calculating the threshold limit of Rs.10 crores, consideration being sales, gross receipts or turnover from business carried on by the seller, i.e. sale from goods and services both shall be considered.
  2. For calculating the threshold limit of Rs.50 lakhs, only sale of goods shall be taken into consideration.
  3. These both threshold limits shall be checked for each year separately

Illustrations

For better understanding of this provision, let’s understand with an example as follows-

S.No

Seller

Buyer

Turnover FY 2019-20

Turnover FY 2020-21

Aggregate Consideration upto 30th Sept, 2020

Aggregate Consideration after 30th Sept, 2020

TCS u/s 206C
(1H)

Remarks

1

X

Y

11 Crore

8 Crore

20 Lacs

60 Lacs

3,000

0.1% on 30 lacs (being excess of 50 lacs)

2

X

Y

10 Crore

13 Crore

20 Lacs

60 Lacs

N/A

Since turnover does not exceeds 10 crores

3

X

Y

12 Crore

15 Crore

60 Lacs

65 Lacs

6,500

On 65 lacs being consideration received after 30th September

4

X

Central Govt.

12 Crore

13 Crore

60 Lacs

60 Lacs

N/A

Since buyer is Central Govt., sec 206C(1H) not apply

5

X - Job worker

Y (TDS deducted u/s 194C)

12 Crore

13 Crore

60 Lacs

55 Lacs

N/A

Since TDS already deducted on the transaction

Some important terms and explanations used in the provision

  1. Seller- Seller means a person whose turnover of goods or gross receipts from the business carried on by him exceeds Rs.10 crores during the financial year immediately preceding the FY in which the sale of goods is applied. Here, sale of services are not covered. Seller not include a person, central government by notification in the official gazette, specify for this purpose.
  2. Buyer- Any person who purchases goods but does not include-
    1. The Central Government, State Government, High Commission, an Embassy, legation, commission, consulate, and trade representative of a foreign state or,
    2. A local authority as defined in explanation to clause(20) of section 10 or,
    3. A person importing goods into India or any other person as may be prescribed by the Central Government in the notification in the Official Gazette of India.
  3. Goods- Goods have not been defined in the Income Tax Act, 1961, so we can refer other acts like Sale of Goods Act, 1930 and Goods and Service Act, 2017, in both the acts, Goods means any kind of movable property other than money and securities but includes actionable claims, growing crops and grass or things attached to or forming part of land which are agreed to serve before supply or under contract of supply.

Conclusion

This new addition in the TCS provisions will result in additional compliances for the seller but brings more transparency in the transaction. Since this is a new provision, it needs more clarifications on some aspects of the section. Also it is a tax based on receipt basis which results in mismatch of information from buyer and seller’s point of view.


To know more about TCS/TDS updates, or TDS Software or TCS Software, drop an email to contactus@webtel.co.in


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