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

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

Each dealer, whose total sales, net receipts or turnover from the business carried on by him surpass ₹ 10 Crores during the FY 2019-20 and onwards, who gets any sum as thought available to be purchased of any goods (excluding exports) of the worth or total of such worth surpassing ₹ 50 Lakhs in any earlier year will at the hour of receipt of such sum gather a whole equivalent to 0.1% of the deal thought surpassing ₹ 50 Lakhs as Tax Collected at Source (TCS) from the purchaser. In the event that the purchaser has not given the Permanent Account Number or the Aadhaar number to the seller, at that point the appropriate pace of TCS will be 1%

Rate of TCS

*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

• In the event that the purchaser is obligated to deduct TDS or gather TCS under some other arrangement of the Act and has deducted/gathered such sum on the goods bought by him from the seller; or
• In the event that the purchaser is the Central/State Govt, a High Commission, legation, consulate, the trade representation of foreign state, local authority; or
• Any Person importing goods to India or any class of individual told by the Central Govt in the official newspaper for the reason subject to such condition as indicated in that warning

Important Points to be Noted

When New Provision is Applicable

Spending plan 2020 for example Fund Act, 2020, each dealer of products (other than Alcohol, Tendu Leaves, Timber, Forest Produce, Scrap, Coal, Lignite, Iron or a Motor Vehicle), whose turnover from offer of merchandise surpasses INR 10 crores in the former money related year, will be needed to gather TCS at the pace of 0.1% (0.075% for FY 2020-21) from clients to whom deals after 30th September, 2020 surpasses INR 50 lakhs (E.g. For pertinence of risk of TCS for deals in FY 2020-21, the deals of FY 2019-20 ought to surpass INR 10 crores). The new arrangement is relevant from first 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.

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:

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 .