Section 206C(1H)– TCS on Sale of Goods, which is newly inserted section and is effective from 01-10-2020. This article will cover a detailed analysis of Section 206C(1H): TCS on sales of goods.
Introduction to section Section 206C(1H)- TCS on Sale of Goods
To widen the Tax base and deepen the tax net, Subsection 1H has been inserted in Section 206C by the Finance Act, 2020 for collection of TCS by the seller on the sale of ANY GOODS.
Although the collection of TCS on Certain Specified goods has been covered under Section 206C but there were various goods that were left to be considered under Section 206C. In order to curb & track usage of unaccounted money, those remaining goods which were not covered under Other Provisions of TCS have now been brought under the Ambit of TCS by inserting Sub Section 1H in Section 206C for TCS on sales of goods.
Applicability of Section 206C(1H)– TCS on Sale of Goods
Section 206C(1H) is applicable on “Every Person being a Seller whose TOTAL SALES, GROSS RECEIPTS OR TURNOVER during the PRECEDING FINANCIAL YEAR is MORE THAN Rs.10 Crore (Sales in PFY> 10 Crore) & who makes sale of “goods” whose value, EITHER INDIVIDUALLY OR IN AGGREGATE EXCEEDS 50 Lakhs, the seller shall collect tax at source at 0.1% ON THE VALUE OF SALE CONSIDERATION EXCEEDING 50 Lakhs from the buyer”.
For Example: If in the Preceding Financial Year the Turnover is exceeding 10 Crore & the Sale of Goods is 65 Lakhs then the TCS shall be Collected @ 0.1% of Rs. 15 Lakhs (65 Lakhs- 50 Lakhs).
Goods on Which Section 206C(1H) is not applicable
- TCS shall be levied on ALL GOODS except those which are explicitly stated in Section 206C(1), 206C(1F) & 206C(1G) AND for which separate rates have been prescribed under Section 206C.
- Goods which are explicitly stated in other sections:
|Section||Items covered under TCS|
|206C (1)||A. Alcoholic Liquor for human consumption|
B. Tendu leaves
C. Timber obtained under a forest lease
D. Timber obtained by any mode other than under a forest lease
E. Any other forest produce not being timber or tendu leaves
F. Scrap g. Minerals, being coal or lignite or iron ore
|206C (1F)||A. Motor vehicle (if value exceeds 10 Lakhs)|
|206C (1G) *||A. Sum of money (above 7 Lakhs) for remittance out of India |
B. Seller of an overseas tour program package
Non-Applicability of Section 206C(1H)
Section 206C(1H) is not applicable in the following cases:
- If goods are exported from India to any country outside India.
- If buyer is liable to deduct TDS under Income Tax Act.
- If the goods sold are already covered under subsections (1), (1C), (1F) and (1G)* of section 206C.
To understand the provision of TCS we need to understand various terms which are as follows:
- Tax Collected at Source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale. The rate of TCS is different for goods specified under different categories. Section 206C of the Income Tax Act governs the categories of goods on which seller has to collect tax from the purchasers. TCS is mentioned on the invoice, collected from the buyer and is paid to Govt Account by the seller.
- Difference between TDS & TCS: TDS is when a Payer Deducts Certain amount out of the Payments while making the payment to Payee whereas the TCS is the amount that has been collected by the Seller at the time of Sale.
Frequently Asked Questions(FAQ) on Section 206C(1H)
Section 206C(1H) which is TCS on sales of goods is effective from 01-10-2020
For the applicability of the provisions of Section 206C(1H), the TOTAL TURNOVER in the Preceding Financial Year should exceed 10 Crore & for the levy of TCS the Sales of GOODS exceeds 50 Lakhs. The applicability of this section will fluctuate with the fluctuations in the turnover of the assessee.
Seller means a person whose Total Sales, Turnover, Gross Receipts from the business being in preceding Financial Year exceeds Rs. 10 Crores.
Buyer: means a person who purchases any goods but does not include:
> Central Government, State Government, an embassy, a High commission, legislation, 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 Central Government may, by notification in the official gazette, specify for this purpose, subject to such conditions as may be specified therein.
The Term “Goods” has not been defined in the Income Tax Act and will lead to litigation as there will always be difference of opinion between the person collecting TCS and the tax Authorities.
As per section 2(52) of CGST Act, “Goods” means every kind of movable property other than money & securities but includes actionable claims, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
While calculating the threshold of Rs.10 Crore, the TOTAL TURNOVER including gross receipts and sales is to be taken into consideration. Also, the Sale of Service shall also be taken into consideration while calculating the Limit of 10 Crore. Whereas for computing the threshold of Rs.50 Lakhs, ONLY SALE OF GOODS is to be considered. GST Component is to be included while calculating the Sales Consideration.
Sales return is to be adjusted(reduced) while calculating the threshold under the provisions of this section. However, in case of sales return in subsequent years it may lead to some practical challenges that need to be clarified by CBDT.
TCS shall be collected on sale of goods only.