23 May 2023
One of our clients is dealer and manufacturer in high-end jewellery. The foreign customers visiting India and buying jewellery from their showroom with single transactions exceeding Rs.50 Lakhs. Foreign buyers are making payment through swap of forex card against the delivery of the jewellery as per bills issued by the jeweler. The client wants clarifications of TCS liability as per the interpretation of section206C(1H) of Income Tax Act, 1961. Section 206(1H) read 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 percent 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 Aadhar 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 percent”, the words “one percent” 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. Following are our queries for TCS from foreign buyers purchasing locally : 1. Foreign buyers are not having PAN or Aadhar Card. 2. The foreign sales invoice made by jewelers exceeding Rs.50 Lakhs which was paid by foreign buyer by swap of forex card against delivery of goods. 3. Whether the assessee is required collect TCS from foreign buyers who are purchasing goods locally ? 4. If Yes, what is the rate of TCS to be collected ? in view of above situation and proviso 1 to sub-section 1H to section 206C of Income Tax Act,1961. 5. Foreign buyers are not ready to pay TCS as they are paying GST on Invoice value and not claiming TCS credit in their home country.
Please provide clarification on the matter to determine the TCS liability u/s 206C(1H) of Income Tax Act, 1961. Awaiting your early reply.
06 July 2024
Here are the clarifications regarding the TCS (Tax Collected at Source) liability under Section 206C(1H) of the Income Tax Act, 1961, for your client who deals with high-end jewellery and has foreign customers:
1. **Foreign Buyers without PAN or Aadhaar Card**: - Since the foreign buyers do not have PAN or Aadhaar, the provisions of Section 206CC come into play. According to Section 206CC, if the buyer does not provide PAN or Aadhaar, the TCS rate increases to 1% instead of 0.1%.
2. **Transaction Details**: - The transaction involves foreign buyers purchasing jewellery exceeding Rs. 50 lakhs in value through the swap of forex cards against delivery of goods.
3. **Applicability of TCS**: - Yes, the assessee (jeweller) is required to collect TCS from foreign buyers who purchase goods locally and the transaction value exceeds Rs. 50 lakhs in a financial year. This is in accordance with Section 206C(1H).
4. **Rate of TCS**: - The TCS rate applicable in this case is 1% of the sale consideration exceeding Rs. 50 lakhs if the buyer does not furnish PAN or Aadhaar. This is as per the proviso to Section 206C(1H).
5. **Foreign Buyers' Perspective**: - Foreign buyers may not be familiar with Indian TCS requirements and might argue that they are already paying GST on the invoice value. However, GST and TCS are separate provisions under Indian tax law. GST is a consumption tax, while TCS is an income tax collected at the source. Whether or not the foreign buyers claim TCS credit in their home country does not affect the liability of the jeweller to collect TCS as per Indian tax laws.
### Conclusion: Your client, the jeweller, must comply with the provisions of Section 206C(1H) and collect TCS at the rate of 1% from foreign buyers if they do not provide PAN or Aadhaar. It's essential to ensure proper documentation and compliance with tax laws to avoid penalties or disputes. If foreign buyers continue to resist TCS collection, it might be beneficial to educate them about Indian tax requirements or seek guidance from tax experts on how to manage such situations effectively.
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