The TCS under Income Tax Act,1961 section 206C(1H) on sale of goods has been implemented from 1.10.2020 on receipt of payment exceeding Rs.50,00,000 from the buyer. However, a question is arising as to how this TCS in the Tax invoice should be reported in GSTR1 under GST.
TCS was applicable earlier also like for sale of scrap. However, there is a difference between the two. Let us first look at the relevant provisions under the Income Tax Act.
Section 206C.: (1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods
Section 206C(1H): Section 206C(1H) – Every person, being a seller, who receives any amount as consideration for the 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 subsection (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1% of the sale consideration exceeding fifty lakh rupees as income-tax. This section becomes operative from 1st October 2020. The rate is .075% till 31st March 2021.
From the above, you will notice that while for sale of scrap (for example) the TCS is to be collected is at the time of debiting the sale amount to the account of buyer whereas in case of TCS in respect of the sale of goods is on receipt of payment.
Now let us look at the Tax invoice under the GST provisions. The invoice is raised with taxable value and tax amount. The newly introduced TCS under IT Act from 1.10.2020 is in respect of payment received. TCS is not a charge on the supply of goods but is to be collected on receipt of payment. In other words, the seller’s liability for TCS arises on the receipt of payment and not on sale/supply of goods.
Therefore, it would not be correct to add the TCS in the tax invoice under GST. Then what should be done? In my view, one can treat it one of the following ways.
1. Show it in the tax invoice in below manner-
Taxable value = 1000
GST = 180
INVOICE VALUE = 1180
TCS u/s 206c(1H) collectable on receipt of payment @ 0.075% =0.885=0.90.
Do not add TCSs to invoice value.
2. You can raise debit notes separately for the TCS amount. But this will increase unnecessary documentation. So the first method is superior.
How to report in GSTR1
When you report such tax invoice in the GSTR1 on GSTN then you should mention-
Taxable value =1000
GST =180
Invoice value =1180.
Because if we report invoice value as Rs.1180.90 then it will mismatch. Therefore, we have to report invoice value in GSTR1 as 1180 for the reasons stated above. TCS is not to be reported in GSTR1.
Disclaimer: The views expressed in this article are strictly personal.
The author is a member of The Institute of Chartered Accountants of India.
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