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September 21, 2020

Know all about TCS new Provision 206C (1H) applicable to Taxpayers from 1 October 2020

Know all about TCS new Provision 206C (1H) applicable to Taxpayers from 1 October 2020

The Central Board of Direct Taxes has brought about changes in the TCS provisions with effect from 1st October, 2020 through the Budget 2020 i.e. Finance Act 2020.

These changes shall affect a wide range of businesses across various industries. The article explains scope, eligibility and exceptions

Click to Read Update as on 30 September 2020 : CBDT issues Guidelines on new TDS & TCS norms applicable from 1 October 2020

TCS Scope Widening

Eligibility

  • Sale of any goods above Rs. 50 lakhs; and
  • Turnover of Rs. 10 Crores and above during FY 2019-20 and onwards Effective from 1 October 2020

Every seller, whose total sales, gross receipts or turnover from the business carried on by him exceed ₹ 10 Crores during the FY 2019-20 & onwards, who receives any amount as consideration for sale of any goods (excluding exports) of the value or aggregate of such value exceeding ₹ 50 Lakhs in any previous year shall at the time of receipt of such amount collect a sum equal to 0.1% of the sale consideration exceeding ₹ 50 Lakhs as Tax Collected at Source (TCS) from the buyer. If the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the applicable rate of TCS will be 1%

Rate of TCS

SectionNature of ReceiptsReduced rate from 1st October 2020 to 31st March 2021*Rate of TCS from 1st April 2021 onwards
206C(1H)Sale of goods (other than Alcohol, Tendu Leaves, Timber, Forest Produce, Scrap, Coal, Lignite, Iron or a Motor Vehicle)0.075%*0.1%

*Rate of TCS u/s 206C(1H) is 0.1%. However, since the rates of TDS and TCS have been slashed by 25% due to the measures announced by the Finance Ministry in the wake of COVID-19, the rate u/s 206C(1H) stands reduced by 25% too

Exceptions

  • If the buyer is liable to deduct TDS or collect TCS under any other provision of the Act and has deducted/collected such amount on the goods purchased by him from the seller; or
  • If the buyer is the Central/State Govt, an embassy, a High Commission, legation, consulate, the trade representation of foreign state, local authority; or
  • Any Person importing goods to India or any class of person notified by the Central Govt in the official gazette for the purpose subject to such condition as specified in that notification

.

Important Points to be Noted

When New Provision is Applicable

Budget 2020 i.e. Finance Act, 2020, every seller of goods (other than Alcohol, Tendu Leaves, Timber, Forest Produce, Scrap, Coal, Lignite, Iron or a Motor Vehicle), whose turnover from sale of goods exceeds INR 10 crores in the preceding financial year, shall be required to collect TCS at the rate of 0.1% (0.075% for FY 2020-21) from customers to whom sales after 30th September, 2020 exceeds INR 50 lakhs (E.g. For applicability of liability of TCS for sales in FY 2020-21, the sales of FY 2019-20 should exceed INR 10 crores). The new provision is applicable from 1st October, 2020.

Is it applicable to Service Provider?

New TCS provision is not applicable to service providers since it is applicable only to seller of certain kinds of goods.

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Which goods are excluded?

“Goods” has not been defined in the Income tax act and hence reference is made to Section 2(7) of the Sale of Goods Act, 1930 which defines goods to “mean every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”.

For the purpose of Section 206C(1H), goods shall mean to include all goods as per above definition, however, the below goods shall be excluded

  • Alcoholic Liquor for human consumption
    • Tendu leaves
    • Timber obtained under a forest lease
    • Timber obtained by any mode other than under a forest lease
    • Any other forest produce not being timber or tendu leaves
    • Scrap
    • Minerals, being coal or lignite or iron ore
    • Motor vehicle (if value exceeds INR 10 Lakhs)

Are goods Exported Outside India liable fot TCS

Goods exported out of India shall be excluded.

On which seller TCS would apply?

If the sales during the year for sales to any single customer is below INR 50 Lakhs then the seller of goods will not be liable for TCS. Only when the sales consideration for sales to any single customer during the year exceeds INR 50 Lakhs, the seller will be liable for collecting TCS on the sales / receipts exceeding INR 50 lakhs made to such a customer.

TCS u/s 206C(1H) is inclusive of GST or only on the value of goods excluding GST?

TCS is to be collected on amount excluding GST since the words used are ‘sales consideration

When TCS has to be collected?

As per Section 206(1H), TCS is required to be collected at the time of receipt of sales consideration

What is rate of TCS if buyer has no PAN?

The rate of TCS u/s 206C (1H) to be collected shall be 1% of the sales consideration.

Can TCS Lower Rate Certificate can be applied ?

There has been no corresponding amendment into the provision of TCS for making an application for collection of tax at such lower rate than the relevant rate specified in section. The only section covered by the for making an application for collection of tax at such lower rate than the relevant rate specified in sub-section pertains to scrap sales, Alcoholic Liquor for human consumption, Tendu leaves, license for parking lot, toll plaza, Mining & quarrying etc.

The exemption from collecting tax is given only to those buyers who are liable to deduct tax at source under any other provision of this Act and has deducted such amount. The buyer will get the tax-credit of tax collected at source by the seller

What are the due dates for payment and filing returns for the TCS so collected?

Answer:

Month in which TCS collectedDue date for payment of taxDue date for filing return
April7th May15th July
May7th June15th July
June7th July15th July
July7th August15th October
August7th September15th October
September7th October15th October
October7th November15th January
November7th December15th January
December7th January15th January
January7th February15th May
February7th March15th May
March7th April15th May

Draft Email to be send to all your Customers

Dear Valued Customer ,

This is in reference to amendment made to THE FINANCE ACT, 2020

As per Section 206C(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, 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, Effective from 1st October,2020 “

Based on the above provision, TCS Provision are  applicable on receipt basis but to remove complexities and to simplify the matter, XXX Ltd will charge TCS @ 0.075% on all our invoices raised to you on or after 1st October 2020, irrespective of the amount of turnover with your company. TCS will be charged on Total billing including Freight, insurance, loading, unloading but excluding GST. 

The payments collected along with TCS for bills raised from 1st October 2020 shall be deposited in the TCS a/c and we will issue you the certificate upon receipt of consideration including and up to the amount of TCS received as per the applicable provision of the law.

The amount deposited on TCS a/c on behalf of your company can be availed for credit while filing your Income Tax Return. Note our tax numbers for the same.

Permanent Account Number  –       XXXXXXXX

Tax deduction Account Number – XXXXXXXXX

Kindly confirm this arrangement as per mail. Please feel free to reach out to Mr. xxx for any queries or clarifications .

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