TCS on sale of any goods – Section 206C

In the Finance Act 2020 a new Sub Section 1H of Section 206C has been inserted to expand the Scope of TCS. As per sub section 1H of section 206C seller of the goods is liable to collect TCS on sale of goods aggregate value exceeding Rs. 50 Lakh in a financial year.

Summary of sub section 1H of section 206C

• Nature of collection: A seller of goods is liable to collect TCS @ 0.1 % on sales consideration received from a buyer in a previous year in excess of Rs. 50 Lakhs
• Applicability: This section is applicable from 01-10-2020
• Collector or Seller (who liable to collect TCS):
• “Seller” means a person whose total sales, gross receipts or turnover from the business exceed Rs. 10 crores during the financial year immediately preceding the relevant financial year.
• Seller does not include 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.
• Buyer: Any person
• Threshold Limit: Receipt of the consideration in excess of Rs. 50,00,000/-
  • For example, ABC Ltd. received an amount of Rs. 80 Lakh from Mr. X as a sale consideration during the FY 2020-21 and turnover of ABC Ltd is Rs. 15 crores during the FY 2019-20. In this case, TCS collection shall be Rs. 3000 (30 Lakh ×1%).
• Rate of TCS:
  • If PAN is furnished by the buyer: @ 0.1%
  • If PAN is not furnished by the buyer: @ 1%
• Time of collection: At the time of receipt of such amount
• No TCS collected by the seller:
  • If seller is liable to collect to TCS under any other provision of section 206C.
  • If buyer liable to deduct TDS under any other provision of this Act and has deducted TDS on such amount.
  • If the buyer is:
  • Central Government,
  • State Government,
  • An embassy,
  • High Commission,
  • legation,
  • Commission,
  • Consulate,
  • The trade representation of a foreign State,
  • Local authority as defined in the Explanation to clause (20) of section 10 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.
• Point to be Noted:
  • TCS is required to be collected on trade receivables stranding in books as on 31-03-2020 if the receipts from a trade receivable, exceeds Rs. 50 Lakh during the FY 2020-21.

 Provision Extract from Section 206C of the Income Tax Act

(1H)   Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the 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 per cent. of the sale consideration exceeding fifty lakh rupees as income-tax:

Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words “five per cent.”, the words “one per cent.” had been substituted:

Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act and has deducted such amount.

Explanation. ––For the purposes of this sub-section, ––

• “buyer” means a person who purchases any goods, but does not include, ––
• the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or
• a local authority as defined in the Explanation to clause (20) of section 10; 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” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out, 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.