Tax collected at Source on sale of Goods effective from 01st October 2020
Due date for filing Annual return
and audit report under GST has been extended, tax payer got some relaxation
however new compliance requirement has been introduced which is applicable from
01st October 2020 i.e. tax to be collected at source on sale of
goods.
Vide Finance Bill, 2020
sub-section (1H) of section 206C of the Income Tax Act has been introduced
which has proposed for tax collection at source (‘TCS’ ,will use it in
remaining part of post), originally it was scheduled to be effective from 01.04.2020
but later has been provided that section will be effective from 01.10.2020.
I am just trying to explain it in frequently asked question (FAQ) format, hope that it will make easy to understand and comply with Law:-
First go through the extract of the provision which is being
given below for ready reference:-
(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 being exported out of India or 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 on the goods purchased by him from
the seller and has deducted such amount.
Explanation. ––For the purposes of this sub-section, ––
(a) “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;
(b)
“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.’;
Q- who is liable to collect TCS?
A - Seller whose
total sales, gross receipt or turnover from the business carried on by him
exceeds Rs.10 crores during the financial year immediately preceding financial
year in which sale is carried out. It means total turnover of FY 2019-20 of the
seller should be more than Rs. 10 crores.
Q- From whom TCS is to be
collected ?
A- TCS
is to be collected from the buyer whose aggregate purchases from the seller exceed
Rs.50 lacs in the previous year.
Q-
On which amount TCS has to be collected ?
A-
TCS is required to be collected only on
sale consideration exceeding Rs. 50 lacs. In other words, TCS on first
Rs.50 lacs is not required to be collected.
Q- What is rate
of tax for TCS?
A-
Rate
of TCS provided in the section is 0.1% of sale consideration but Vide Press Release
dated 13.05.2020 rate of tax has been reduced for the current financial year to
0.075%.
Q-
Is there change in rate of Tax if buyer does
not have PAN?
A-
In case, buyer does not provide PAN or
Aadhar number to the seller rate of TCS shall be 1%.
Q- Whom provision of TCS under
this section is not applicable ?
A-
This section does not apply to :-
•
If Seller is collecting TCS under any
other provisions of the section 206C.
•
If Buyer is liable to deduct TDS (Tax
deducted at Source) under any Provisions of the Income Tax Act and buyer has deducted TDS.
•
Where buyer is Central government, State Government,
Local Authority, Embassy, High Commission, legation, commission, consulate and
the trade representation of a foreign State. But keep in mind that
in case of Government Company like PSUs ,TCS would be applicable as these are not
Government, it means If seller is making a sale exceeding Rs.50 lakhs to them ,
TCS needs to be collected.
•
In case of export sale ‘directly or through
merchant exporter’
•
In case of import of goods into India and
•
Any other person whom Government may specify.
•
Based on clarification given by CBDT vide Circular No. 17 of 2020
Dated: 29th September, 2020
(i) transactions in securities and commodities which are
traded through recognized stock exchanges or cleared and settled by the
recognized clearing corporation, including recognized stock exchanges or
recognized clearing corporation located in International Financial Service Centre;
(ii) transactions in electricity, renewable energy
certificates and energy saving certificates traded through
power exchanges registered in accordance with Regulation 21
of the CERC;
•
For this purpose,-
(i) “recognized clearing corporation”shall have the meaning
assigned to it in clause (i) of the Explanation to clause (23EE) of
section 10 of the Act;
(ii) “recognized stock exchange”shall have the meaning
assigned to it in clause (ii) of the Explanation 1 to sub-section (5) of
section 43 of the Act;and
(iii) “International Financial Services Centre”shall have the
meaning assigned to it in clause (q) of section 2 of the Special
Economic Zones Act, 2005
Q- When TCS is to collect at the time of invoice raised or sale
consideration received?
A-
The collection is required to be made at the time of receipt of
amount of sales consideration. Based on clarification given by CBDT
vide Circular No. 17 of 2020 Dated: 29th September, 2020
Q- How shall
threshold limit of Rs.50 lakhs be determined?
A- Since the threshold of fifty lakh rupees is with respect to
the previous year, calculation of
receipt of sale consideration for triggering TCS under
sub-section (1 H) of section 206C shall be
computed from 1st April, 2020. Hence, if a person being
seller has already received fifty lakh
rupees or more up to 30th September 2020 from a buyer, the
TCS under sub-section (1 H) of section
206C shall apply on all receipt of sale consideration during
the previous year, on or after 1st
October 2020, from such buyer (Based on clarification given by CBDT vide Circular No.
17 of 2020 Dated: 29th September, 2020)
Q- Is TCS is
apllicable on advance receipt of sale consideration?
A-
Yes , TCS
shall be applicable for advance received on or after 01st October
2020
(Based on clarification given by CBDT vide Circular
No. 17 of 2020 Dated: 29th September, 2020)
Q- Sale was made
before 01st October 2020 but sale consideration has been received on
or after 01st October 2020, Is TCS need to be collected on such
consideration?
A-
Yes, you need
to collect TCS on receipt of such sale consideration even sale happened before
30th Sep 2020.
(Based on clarification given by CBDT vide Circular
No. 17 of 2020 Dated: 29th September, 2020)
Q- whether
adjustment is required to be made for sales return, discount or indirect
taxes including GST for the purpose of collection of tax under sub-section (lH)
of section ?
A-
No, adjustment
on account of sale return or discount or indirect taxes including GST shall
be made for collection of since the collection is made with reference to
receipt of amount of sale consideration.
Q- Whether TCS under sub-section (1H) is to be collected
and deposited in addition to TCS to be collected and deposited as per other
provisions of section 206C of the Act.
A-
No, in case TCS is to be collected and
deposited under any other provision of section 206C, TCS is not
to be collected and deposited under this sub-section.
Q- Whether TCS is to be collected on GST amount
also?
A-
In my understanding ,it is yes as sale
consideration includes taxes.
Q- My company entered in AMC contract and my contractor is providing
goods and services both , consideration of which is going to exceed Rs.50 lakhs
during the year , Do My company needs to collect TCS?
A-
No, As company will deduct TDS under section
194C and this section says that TCS not needed to be collected where
buyer is liable to deduct TDS under any provision of the Act.
Q- My company entered in to AMC contract but in case of any repair or replacement of item my contractor charge separate consideration for the supply of such items, does my company need to collect TCS?
A-
Yes , as there
would be no TDS applicable on supply of such goods and supply of such goods
shall be treated a separate sale.
Hope
that it will make easy to understand the provisions and will make you able to
comply with law , in case any query please write or comment . Subscribe the blog for more update
2 comments:
Sir, if sale consideration is receipt before 1st oct, whether it will apply this provision.
No, Sale consideration received before shall not attract TCS
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