Arjun (Fictional Character): Krishna, what is the new provision of TCS under the Income Tax Act on the sale of Goods?
Krishna(Fictional Character): Arjuna, an amendment has been made in section 206C (1H) of Income Tax, which is as follows: (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 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. It is stated that if any seller of goods whose turnover exceeds Rs. 10 Cr. in the preceding FY, then he is liable to collect TCS @ 0.1% (0.075% till 31.03.2021), on the sale value exceeding Rs. 50 lakhs for each buyer. It is very important to note that TCS is to be paid by the seller on a receipt basis.
Arjun (Fictional Character): Krishna, whether for calculating TCS under Income tax, GST is to be included in consideration value?
Krishna(Fictional Character): Arjuna, Earlier TCS was collected under Income Tax Act u/s 206C on some specified categories of goods like car sale exceeding 10 Lakh, scrap sale, Liquor sale, etc.
Now under 206C (1H) all remaining goods not covered in 206C are covered here.
Whether the GST amount is to be considered for the calculation of TCS amount is a big practical question. Legally though correct, but practically difficult. As no clarification is issued by CBDT in this regard till the date. Further, there is no definition of Turnover and Consideration under the Income-tax Act.
For e.g., If Mr. A sells goods of Rs 20 lakh, the GST rate on such goods is said 28% which amounts to Rs. 5.6 Lakhs, the total is Rs. 25.6 lakhs. Then TCS @0.075% would be calculated on Rs. 25.6 Lakhs i.e., Rs 1920/-.
But whether this legal interpretation to include GST Tax to calculate Income tax amount is right is a big question on practical grounds that need to be clarified by CBDT as soon as possible.
Arjun (Fictional Character): Krishna, for calculating GST should TCS under Income tax amount be included in the Value of supply of GST?
Krishna(Fictional Character): Arjuna, for calculating GST tax liability TCS amount under the Income Tax Act would not be included in the sales consideration amount. As clarified by CBEC (corrigendum to circular No 76/50/2018-GST dated.7th March 2019).
For e.g., If Mr. A sells goods of Rs. 20 Lakhs, then GST @ 28% would be calculated on 20 Lakh only i.e. Rs 5.6 Lakhs. Thus, TCS under Income tax will not be a part of the GST levy. This a welcome clarification from the GST Department.
Arjun (Fictional Character): Krishna, what things are still not clear regarding this provision, and what are some of the practical difficulties that may arise?
Krishna(Fictional Character): Arjuna, following are those things:
1) Why is information on sales being collected and what is the purpose of collecting income tax in advance? As, under the GST Regime, the E-way bill portal, and the GSTN portal has all information of PAN wise sales, which are available with both GST and Income tax departments.
2) E-invoicing will be applicable w.e.f 1.10.20 which will reflect data on sales of goods, then what is the purpose of additional TCS on these transactions?
3) When all be B2B and B2C transactions are covered in GST, to catch B2C transaction (i.e. to find tax evaders or new assesses) through TCS of income tax is going to be very difficult.
4) Lots of data reconciliation in the future will arise of sales, GST Vis-à-vis Income Tax, Vis-a-vis TCS, E-way Bill, State-wise GSTN, Rate wise GST sales, etc.
5) Further no TCS will be levied on inter-branch transactions outside the state but GST on such transactions etc. will be levied. Such issues of reconciliation will be very cumbersome.
6) When there is the provision of payment of Advance Tax and TDS, then what is the need for TCS on all types of goods?
Arjun (Fictional Character): Krishna, what should one learn from this?
Krishna (Fictional Character): Arjuna, there may be many practical difficulties in the application of this provision. However, one must keep themselves updated on any question that is answered by the Income Tax Department or CBDT in the future.
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