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INSERTION OF NEW SECTION 206c BY THE FINANCE ACT, 2020
By CA Sabhya kant
The new section 206 C(1H) of the Income Tax Act,1961 has been introduced by The Finance Act, 2020 for tcs applicability on sale of goods. This Section 206c will be applicable w.e.f. 01.10.2020.
Here you will read all about tcs on sale of goods.
MEANING OF TCS
TCS Means collecting tax at source for certain transactions. Under the specified transactions. seller is required to collect the requisite percentage of the amount payable to buyer as income-tax.
Such amount of TCS is considered as payment of Income-tax & deductible from total income tax liability of purchaser at the time of filing of return of income. (similar as TDS.)
APPLICABILITY
This new provision 206c is applicable in the following circumstances:-
- All the sellers are covered under the ambit of this section which have a turnover/sales/gross receipts exceeding ₹10 Crores in year 2019-20 will be required to collect TCS in year 2020-21.
- The applicability criterion for TCS has to be considered & checked for Every Year.
- This section shall be applicable where value or aggregate value of sales consideration to a party exceeds Rs. 50 Lakh during the year.In this case, the seller has to charge TCS as additional amount in his bill and then deposit it to government.
RATE, PAYMENT TERMS AND RETURNS TO BE FILED.
The Rate of TCS will be 0.1% if the buyer furnishes the PAN/AADHAR and in other cases it shall be considered as 1% of the value.
Due to COVID19, the government has reduced the TDS rates by 25% for FY 2020-21,so Net TCS rate applicable are-
In case where buyer furnishes PAN- 0.075%
In case where buyer DOES NOT furnishes PAN- 0.75%
The TCS which is collected shall be deposited to Govt. within 7 days of the next month which related to tax period. Every person who is collecting tax at source is required to submit a Quarterly TCS Return in FORM-27EQ. The TCS which is collected by seller is reflected in FORM-26AS of the respective Buyer.
The Due date of furnishing the quarterly return for TCS under this section is as below:
| Sr. No. | Quarter | Due-Date |
| 1 | Apr-Jun | 15th of July |
| 2 | Jul-Sep | 15th of Oct |
| 3 | Oct-Dec | 15th of Jan |
| 4 | Jan-Mar | 15th of May |
Also Read- TDS Revised Rates by CA Sabhyakant
COMMON FAQs(Frequently Asked Questions)
Whether TCS is required to be collected on trade receivables of goods standing in books as on 30th September, 2020?
Since this provision is applicable from 01.10.2020, for the sales which were completed as up to 30.09.2020, provisions would not be applicable. Accordingly, TCS is not required to be collected on trade receivables of goods standing in books as on 30th September, 2020.
As per the new provision if any seller of any goods whose turnover in the preceding FY exceeds Rs. 10 Crore then, from 1st of October 2020, he shall be liable to collect TCS @ 0.075% of the sale value from the buyer if the buyer purchase goods for the value exceeding Rs. 50 Lacs (Limit of Rs. 50 Lac shall be seen for each buyer separately). In other words, till the limit of Rs. 50 Lac there is no requirement to Collect TCS by the Seller however the moment purchases of the buyer exceeds Rs. 50 Lac from the same seller then on such excess amount seller shall collect the TCS. However, in the First year of implementation of this new provision Sale made to buyers up to 30th September 2020 shall not be liable to collect the TCS.
If Transaction Liable to TDS, then whether TCS is to be charged and deposited separately?
It is provided that if the buyer is liable to deduct TDS and also deducts it then seller is not required to collect the TCS on such transaction.
Some FAQs are answered through the Examples in Table Below:
| Sr. No. | Seller | Year 19-20 | Year 20-21 (Estimated) | Buyer | Selling till 30th Sep | from 1st October | TCS u/s 206C(1H) | Remarks |
| 1 | Suraj | 12 Cr | 9 Cr | Rohit | 24,00,000 | 65,00,000 | 3,900 (24L in First Half Year-No TCS 26L in next half year-No TCS TCS on next 39L- Yes) | 0.1% on 39 Lac (Being Excess of Rs. 50 Lac) |
| 2 | Suraj | 9 Cr | 12 Cr | Rohit | 24,00,000 | 65,00,000 | NA | As Turnover in the FY 2019-20 not exceeding Rs. 10 Crore |
| 3 | Suraj | 12 Cr | 18 Cr | Rohit | 85,00,000 | 6,00,000 | 600 (No TCS on 85L since TCS exempt on sale till 30.09.2020) | on Rs. 6 Lac being Turnover after 30th September |
| 4 | Suraj | 12 Cr | 18 Cr | Local Authority (Municpal Corporatio of Delhi) | 55,00,000 | 20,00,000 | NA | As this Clause not applicable if buyer is Local Authority |
| 5 | Suraj (Job Worker) | 15 Cr | 12 Cr | Rohit (Who is Liable to deduct TDS on the Value of Job Work | 30,00,000 | 35,00,000 | NA | As this transaction is already covered by TDS |
| 6 | Suraj (Auto Dealer) | 20 Cr | 15 Cr | Rohit (Buy A Car) | 0 | 15,00,000 | NA | As on this transaction TCS shall be Collect u/s 206C(1F) |
KEY TAKEAWAYS:
- If any person has turnover/sales/gross receipts below Rs. 10 Cr, then he is out of scope of the term ‘seller’, meaning that the provision of this section shall not be applicable on that type of Assessee.
- This section shall not be applicable where aggregate sales to a person in a financial year does not exceed Rs. 50 Lakhs.
- Not applicable on Services.
- This section is not applicable for export of goods
- This section is not applicable if the buyer is CG/ SG/Local Authority.
- Buyer shall avail the credit of TCS amount in Form 26AS while filing his income tax return.
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