TCS on sale of goods above Rs. 50 Lakhs
Tax Collected at Source (TCS): The mechanism of TCS has been prevailing under Income Tax Act for a long period of time. TCS is the tax which is collected by the seller from the buyer and then paid to the Income tax Department. The rates of TCS have been prescribed under Income Tax Act. For this purpose, Income Tax Act specifies the categories of goods or transactions which shall be liable for TCS.
TCS on sale of goods under section 206C(1H)
The Government of India in Finance Bill, 2020 introduced a new sub-section (1H) to Section 206C of the Income Tax Act, 1961which widened the scope of collection of TCS. Though, mechanism of collection of TCS on specified goods was already prevalent under Income Tax Act but this new sub-section has been introduced to cover all remaining goods under the ambit of TCS.
The newly inserted TCS provision shall be effective from 1st October, 2020.
Applicability of TCS on sale of goods under section 206C(1H)
- The provisions of TCS are applicable on seller of goods. TCS provisions are not applicable to service providers.
- ‘Seller’ means a person whose total sales, gross receipts or turnover from the business exceeds Rs. 10 Crores during the previous year ended on 31st March.
- This means that every seller whose turnover in the previous financial year was more than Rs. 10 Crores are required to collect TCS under newly inserted sub-section.
When TCS on sale of goods collected
- TCS shall be collected by the seller from the buyer to whom he has sold any goods of the value or aggregate value exceeding Rs. 50 Lakhs in the financial year.
- 'Goods' does not include the following:-
(a) Goods exported outside India
(b) Alcholic Liquor for human consumption
(c) Tendu leaves, Timber
(d) Scrap
(e) Coal, lignite, iron ore
(f) Sale of motor vehicle
(g) Foreign remittances and overseas tour program package - TCS shall be collected from the buyer @ 0.1% at the time of receipt of consideration in excess of Rs. 50 Lakhs.
- In short, TCS shall be collected on: (Total Sales value- Rs. 50 Lakhs) @ 0.1%.
- TCS shall not be collected by seller where the buyer is liable to deduct TDS on such amount and he has deducted TDS on it.
- TCS shall not be collected in the cases where the buyer is:
(a) Central Government or State Government
(b) Embassy, High Commission/ Commission, Legation, Consulate and Trade representation of a foreign state
(c) Local Authority
(d) Any other notified person
Rate of TCS on sale of Goods:-
- TCS on sale of goods to be collected from the buyer @ 0.1% of sales value
- But where, the buyer fails to provide PAN or Aadhar number to seller, the rate of TCS shall be 1% of sales value.
Rate of TCS on sale of goods reduced:-
Due to Covid-19 pandemic, the rate of TCS has been reduced from 0.1% to 0.075% till 31-03-2021. You may refer Press Release issued by Government of India dated 13 May 2020. https://pib.gov.in/PressReleseDetail.aspx?PRID=1623601
