TCS u/s 206C (1H) - Applicability, Exemptions and Payment Schedule w.e.f 1st Oct 20

With effect from 1st of October 2020, Finance Act 2020, introduced a new provision - under Section 206C (1H), regarding the Tax Collected at Source (TCS) on sale of Goods.

Applicability of the Section:

This section is applicable to the sellers of goods, whose turnover during the preceding FY exceeded Rs.10 Crores.

Scenario, where the section comes in:

Only in the event of the sale of goods only and not on services.

Applicable Rates:

From the 1st of October 2020, the seller shall be liable to collect TCS @ 0.1% (Rate will be 0.075% from 01.10.2020 till 31.03.2021) of the sale value on the sale of goods exceeding Rs.50 lakhs to a buyer. The limit of Rs.50 lakhs is to be taken separately for each buyer. The TCS is to be collected over and above Rs.50 lakhs i.e. as the total purchase of the buyer exceeds Rs.50 lakhs the seller has to collect the TCS on the excess amount from the buyer.

However, TCS shall be collected at the rate of 1 percent, in the event where the buyer fails to provide PAN/Aadhaar.

Does the TCS apply for every Financial Year:

To collect the TCS from the buyer, the seller must have a turnover of a minimum of Rs.10 Crores for the Preceding Financial year. If in any preceding Financial year, the turnover of the seller has less than Rs.10 Crores, then the seller is not liable to collect the TCS from the buyer.

The same applies to the buyer, wherein, if during any Financial Year the sale toa particular buyer is less than Rs 50 Lakhs then the seller is not liable to collect the TCS, even though the same buyer met the purchase amount of Rs.50 lakhs during the preceding Financial Year.

Note: Sale made to the buyer till 30th September shall not be liable to collect TCS.

'Buyer' under this section:

"Buyer" means a person who purchases any goods, but does not include, -

(A) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or

(B) a local authority as defined in the Explanation to clause (20) of section 10; or

(C) a person importing goods into India or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein;

'Seller' under this section:

"Seller" means a person whose total sales, gross receipts or turnover from the business carried on by him exceeds ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out and not being a person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

When is a seller exempted from collecting tax at source:

Under Section 206C(1H), a seller is exempted from collecting tax at source when

- the Goods are Exported out of India

- the buyer is liable to deduct the TDS under any other provision and has deducted such an amount

- the Seller is liable to collect the TCS under any other clause of Section 206C

- the seller is dealing with the following goods:

a. Alcoholic Liquor for human consumption
b. Tendu Leaves
c. Timber obtained under forest leased. Timber obtained by any mode other than under a forest lease
e. Any other forest produces not being timber or tendu leaves
f. Scrap
g. Minerals, being coal or lignite or iron ore
h. Motor Vehicle (if the value exceeds 10lakhs)
i. Sum of money (above 7 lakhs) for remittance out of India
j. Seller of an overseas tour program package

Point of collection of TCS:

The TCS has to be collected at the time of receipt of consideration by the seller i.e. it is to be collected on receipt basis. Even if the seller receives advance money from the buyer for the sale of goods, the seller is liable to collect TCS on the advance amount.

Payment of the collected TCS:

The due date for payment of TCS collected: 7th of the following month for every month.

Quarterly TCS returns to be submitted through Form 27EQ.

Quarterly Statement: Due date to file the TCS return and issue certificate:

The author is a member of the Institute of Certified Practising Accountant, Australia, and an Associate Member of the Institute of Chartered Accountants of India and can be reached at casusmitadutta@gmail.com.

Disclaimer: The facts and opinions written in this column are those of the author and have been prepared on the basis of relevant provisions and information available at the time of preparation. The article does not constitute any professional advice or a formal recommendation. The author has undertaken the utmost care to disseminate true and correct views and does not accept liability for any errors or omissions.

Read more on some of the FAQs on TCS u/s 206C (1H).