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TCS on Scrap.

sukhwani keyur (588 Points)

07 November 2022

Whether TCS applicable on mere trading of scrap by scrap dealer ?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178226 Points)
Replied 07 November 2022

Yes, applicable for trading purpose.

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Kesavaraj S (578 Points)
Replied 07 November 2022

Yes,TCS applicable at the rate of 1%...

sukhwani keyur (588 Points)
Replied 07 November 2022

But in provision it has been mentioned that scrap should have been generated out of manufacturing process. In trading there is no manufacturing process so how can traders collect. Plz clarify if anyone having any input on this.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178226 Points)
Replied 08 November 2022

As per sec. 206(C) of IT act....

When the mentioned goods (including Scrap) are utilized for the purpose of manufacturing, processing, or producing things, the taxes are not payable.

If the same goods are utilized for trading purposes, then tax is payable.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178226 Points)
Replied 08 November 2022

Originally posted by : sukhwani keyur
	But in provision it has been mentioned that scrap should have been generated out of manufacturing process. In trading there is no manufacturing process so how can traders collect. Plz clarify if anyone having any input on this.

The scrap which you deal/trade, if originated out of manufacturing process, is still remains scrap.

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sukhwani keyur (588 Points)
Replied 08 November 2022

According toh various case laws such as Navine Fluorine International, Lala Bharat Lal & Sons, etc, it has been held that trading in scrap cannot be deemed to have any nexus with manufacturing and hence a trader cannot be subject to TCS. Trader is not actually manufacturing the scrap, but purchasing it from an entity which is involved in its manufacture.

This is has been held in various case laws that's why I have confusion.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178226 Points)
Replied 08 November 2022

Well I agree that there are case laws in favor as well as against assessee, as in the case of ‘M/s Bharti Auto Products’ (supra), the Special Bench has clearly decided the issue in favor of the Revenue by holding that the provisions of section 206C of the Act are applicable to the suppliers and traders in scrap also. It was further submitted that the Hon’ble Gujarat High Court in the case of ‘CIT (TDS) vs. M/s Priya Blue Industries Pvt. Ltd.’ (supra) has not specifically dealt with the ground taken by the Revenue and therefore, it cannot be said that the Hon’ble Court had overruled the judgment of the Special Bench in the case of ‘M/s Bharti Auto Products’ (supra).

So, the matter can only be decided by higher authorities, in each case particularly, as ITO particularly may not allow it at first stage.

sabyasachi mukherjee (27579 Points)
Replied 09 November 2022

Tax collected on scrap.

getgoing (--) (20 Points)
Replied 25 April 2023

We manufacture motor related parts and we sold scrap which are not usable, do we need to require to charge TCS on sale of this transaction.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178226 Points)
Replied 25 April 2023

Yes, provided you fit in the definition of seller under the section...

“Seller” means-

a. the Central Government,

b. a State Government

c. any local authority

d. corporation

e. authority established by or under a Central, State or Provincial Act

f. any company

g. firm

h. Co – operative society.

i. Individual or a HUF whose turnover in just preceding FY exceeds Rs. 1 Crore or Rs. 50 Lakhs, as the case may be.

“Buyer” means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in section 206C(1) or the right to receive any such goods.

However, buyer does not include the following:

= a public sector company, the Central Government, a State Government, and an Embassy, a High Commission, Legation, Commission, Consulate and the trade representation, of a foreign State and a club. OR

= a buyer in the retail sale of such goods purchased by him for personal consumption.

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Harshini Hasthavaram (31 Points)
Replied 25 April 2023

Yes, TCS is applicable on Scrap. According to Section 206C of the Income tax, TCS must be collected from the purchaser and it is only applicable to specific goods. It includes Scrap minerals like ignite, alcohol for human consumption and more. The TCS applicable on Scrap is 1%.

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Apurba Pandit (Owner) (0 Points)
Replied 24 May 2023

Is every scrap sale liable to TCS?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178226 Points)
Replied 24 May 2023

No.

As per sec. 206(C) of IT act.... When the mentioned goods (including Scrap) are utilized for the purpose of manufacturing, processing, or producing things, the taxes are not payable. If the same goods are utilized for trading purposes, then TCS is deductible.