TCS On Sale Of Goods

The government of India has introduced Section 206C(1H) of the Income Tax Act, 1961 with regards to Tax Collection at Source on sale of any other goods. Applicable to all sellers of goods whose turnover for the preceding Financial Year exceeds INR 10 crores w.e.f. 01.10.2020. This provision is not applicable where other TCS & TDS provisions is applicable.

Key points to be noted:

• Every seller who has received any amount as consideration on sale of any other goods above INR 50 lakhs are liable to collect an additional 0.1% of the bill amount, collect PAN and pay/deposit such amount as TCS every month.
• Even though the TCS amount is debited to the buyer, the liability does not arise until the time the amount is collected/received.
• TCS returns have to be filed like TDS returns and compliances like issuance of certificate etc. are to be followed.

Action point:

• We advise all assessees to complete accounting for half-year till 30.09.2020 and separate parties with whom sale of INR 50 lakhs are made.
• From every sale after 01.10.2020 to such parties, the assessee would be liable to levy 0.1% TCS in every bill and keep record of the same, as tax is payable at the time of receipt from such sale.
• Accordingly, sellers will need to add 0.1% to the bill value and deposit with the government on receipt of the payment from buyers.

Flow Chart of TCS applicability:

Due date* for TCS Payment, Return filing, and issue of TCS certificate *subject to extensions as provided by CBDT due to COVID19/lockdown. » Read our Income Tax Rate Blog to know about TDS, TCS and the rates applicable

Illustrations:

1. If Sales consideration is INR 80 lakhs, and since the threshold limit for applicability of TCS u/s 206C(1H) is INR 50 lakhs per customer, whether TCS u/s 206C(1H) has to be collected on INR 80 lakhs or on INR 30 lakhs?

• TCS must be collected on INR 30 lakhs.

2. Goods are sold to a customer viz. AMO Pvt Ltd. for INR 65 Lakhs in September 2020 and sales consideration received upto 30th September 2020 is INR 45 Lakhs. For the period beginning from 1st October 2020, the receipt of outstanding consideration is INR 20 lakhs. Whether the seller is liable for collecting TCS u/s 206C(1H)?

• The provisions of section 206C(1H) came into effect on and from 1st October 2020. Hence, for sales in September 2020, there will be no liability to collect TCS even if, the sales consideration is received on or after 1st October 2020.

3. If goods are sold to a customer viz. AMO Pvt Ltd for INR 65 Lakhs in September 2020 and sales consideration received on 5th October 2020 is INR 65 lakhs, whether the seller is liable for collecting TCS u/s 206C(1H)?

• The provisions of section 206C(1H) came into effect on and from 1st October 2020. Hence, for sales in September 2020, there will be no liability to collect TCS even if the entire sales consideration of INR 65 lakhs is received on or after 1st October 2020.

4. If goods are sold to a customer viz. MAB Pvt Ltd for INR 90 lakhs in September 2020 and for INR 45 lakhs in October 2020, on what amount is the seller liable to collect TCS u/s 206C(1H)?

• The applicability of Section 206C(1H) is triggered when sales to a customer exceed INR 50 lakhs in aggregate during a financial year. In our opinion, for this purpose, the sale of goods for the period before 1st October 2020 has also to be considered. In the given example, sales up to 30th September 2020 is INR 90 lakhs which is above INR 50 lakhs, hence the applicability of Section 206C(1H) is triggered. The seller will be liable to collect TCS on INR 45 Lakhs only (as and when the amount is received from the customer) which is the sales in the period from which the provisions of section 206C(1H) have become applicable i.e. from 1st October 2020.

5. If goods are sold to a customer viz. AMO Pvt Ltd for INR 35 lakhs in September 2020 and for INR 25 lakhs in October 2020, on what amount is the seller liable to collect TCS u/s 206C(1H)?

• The seller will be liable to collect TCS on INR 10 Lakhs (as and when the amount is received from the customer) which is the sales in the period from which the provisions of section 206C(1H) have become applicable i.e. from 1st October 2020.

Clarification required from CBDT:

• What is export as per the provision of TCS? Does that include High sea sales, sale to deemed exports like SEZ/ EOU etc.?
• What is the applicability of TCS on barter transactions?
• What is the definition of Goods?
• What is TCS liability on Bad debts recovery?
• How to resolve the mismatch between books and Form 26AS?
• Applicability of the provision when the sale transaction has credit note/ debit note/ cancellation?

How can Incorp help?

Our experts can help you in the following-

• Obtain Lower TCS certificates for the assessee.
• Determination of parties on which TCS provision is applicable as on 30^th Sept 2020.
• Assistance on monthly TCS compliance assistance.