Posted on Leave a comment

TCS on Sale of Goods [30 FAQs]

FAQ 1: Who is required to collect tax at source under section 206C(1H) and what rate?
With effect from 1st October, 2020, a seller of goods is liable to collect TCS at the rate of 0.1 percent of the sale consideration received from a buyer in a previous year in excess of fifty lakh rupees.
“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.
Illustration

ParticularsSeller  Alpha Ltd.Seller Gama Ltd.
Sales during the previous year 2019-20Rs. 9.8 croreRs.9.8 crore
Interest on fixed deposits during previous year 2019-20Rs. 0.25 croreRs.Nil
Job work Charges during previous year 2019-20Rs. NilRs. 0.25 crore
TotalRs. 10.25 croreRs.10.25 crore
Whether liable to collect tax at source under section 206C(1H)?NoYes


FAQ 2: What would be the rate of TCS under section 206C (1H) in case Buyer does not furnish PAN / Aadhar?
The rate of TCS in such cases shall be 1%.


FAQ3: Is there any concession in the rate of TCS due to corona outbreak?
Due to the corona outbreak, there is a concession of 25 percent on this rate till 31 March 2021. Therefore, the effective rate shall be 0.075%.


FAQ 4: At what point of time TCS under section 206C (1H) shall be collected?
Tax has to be collected by the seller at the time of receipt of such amount from the buyer.

FAQ 5: Is there any threshold limit for TCS under section 206 C(1H)?
The threshold limit for the purpose of this section is Rs. 50,00,000. That means, no TCS shall be collected from buyer upto the collection of Rs. 50,00,000 during the previous year.


FAQ 6: How this threshold limit of Rs. 50,00,000 would be considered for the financial year 2020-21?
In order to consider the limit of Rs. 50 lakhs, all the amount received from 1 April 2020 will be counted as this limit is for the whole financial year. However, TCS shall be collected for the amount received from buyer on or after 1 October 2020 since the provision is applicable from 1st. Oct. 2020.
Illustration:
If your collection from the customer is Rs.40 Lakhs before 1st October, 2020 and further collection is 15 lacs on 5th October, then TCS will have to be collected only on 5 lakh rupees.

FAQ 7 : Whether liability to collect tax at source arises in respect of sale effected before 01.10.2020 and collection has also been received before 01.10.2020?
No

FAQ 8 : Whether liability to collect tax at source arises in respect of advance received before 01.10.2020 but sale has been effected on or after 01.10.2020?
No


FAQ 9 : Whether liability to collect tax at source arises in respect of sale effected before 01.10.2020 and collection has been received on or after 01.10.2020?
Yes.
Illustration: Sale of goods effected in June, 2020 worth Rs. 88 Lacs and collection of Rs. 60 Lacs received in October, 2020. Then, in this case, seller is required to collect tax at source on Rs. 10 Lacs.

FAQ 10 : Whether liability to collect tax at source arises in respect of sale effected on or after 01.10.2020 and collection has also been received on or after 01.10.2020?
Yes
Illustration:

First Sale of goods effected in October, 2020 worth Rs. 25 Lacs, in November ,2020 worth Rs. 45 Lacs and out of outstanding of Rs. 70 Lacs, collection received in  January, 2021 Rs.  55 Lacs. Then in this case, seller is required to collect tax at source on Rs. 5 Lacs.

Let us assume that no further collection was received till the year end i.e. 31-03-2021. And remaining dues of Rs. 15 Lac were finally collected in the month of April 2021. Then, in this case seller is not required to collect tax at source on Rs. 15 Lacs.

FAQ11 Whether TCS shall be collected on the Advance Received for sale of goods ?
Yes. TCS shall be collected at the time of receipt of Advance money from the buyer.

FAQ 12 Are there any situations under which no TCS is required to be collected?
Yes. Consider the following situations:
(a) No such TCS is to be collected on consideration for goods being exported out of India.
(b) No such TCS is to be collected, if the seller is liable to collect TCS under the provision of section 206C (1) / (1F) / (1G).
(c) No such TCS is to be collected, if the buyer is liable to deduct TDS under any provision of the Act and has deducted such amount.
(d) No TCS when Buyer is

  • the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State; or
  • a local authority
  • a person importing goods into India
  • any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to conditions as prescribed in such notification.

FAQ 13 Whether TCS shall be computed on the amount of GST involved in the sale of goods?
Yes. TCS shall be computed on the gross total amount of sale including all taxes, duties, charges, levies etc.

FAQ 14 Whether TCS shall be computed on the amount of freight, insurance, royalty or other charges collected along with the price of goods?
Yes. TCS shall be computed on the gross total amount of sale including all such charges as may be collected.

FAQ 15 Whether TCS shall be collected on the amount received by way of book adjustment or barter ?
Yes.

FAQ 16 Whether TCS shall be refunded or adjusted in case of Sales Return / Credit Notes ?
No.

FAQ17 Whether TCS shall be computed on the amount of Delayed Payment Charges / Interest with respect to sale of goods ?
Yes.

FAQ 18 Whether provisions of TCS shall be applicable to “Supply of services” also?
No. The provision of section 206C (1H) are applicable in relation to the “sale of goods” only. The “Supply of services” have been kept outside the purview of this section.

FAQ 19 Whether TCS is applicable with respect to second hand goods / sale of capital assets?
Yes. However, Capital Assets in nature of an immovable property are not goods and therefore not covered under TCS regime.

FAQ 20 Whether TCS shall be collected when fuel is supplied to non-resident airlines?
CBDT has clarified that no TCS shall be collected in such cases.

FAQ 21 Whether TCS provision shall be applicable on sale of electricity?
Yes.

FAQ 22 Whether TCS provisions shall be applicable on transactions carried through various exchanges?
CBDT has clarified that TCS provisions shall not be applicable in such cases.

FAQ 23 How TCS provisions be applicable in case of sale of Motor Vehicles?
CBDT has clarified as under:
(i) In case of sale to dealer, TCS shall be applicable under section 206C(1H) of the Act.
(ii) In case of sale to customers, where the consideration for sale of motor vehicle is Rs. 10 lakh or less then it would be subject to TCS under section 206C(1H) if aggregate collection from such customer during the previous year exceeds Rs. 50 lacs.
(iii) In case of sale to customers, where the consideration for sale of motor vehicle is exceeding Rs. 10 lakh then TCS is to be collected under section 206C(1F) of the Act and not under section 206(1H) of the Act.

FAQ 24 By what time tax collected from the buyer is to be deposited with the Central Government?
Tax collected under this provision is to be deposited within 7 days from the end of month in which collection is made.
Illustration: If seller collect payment in October 2020, then TCS shall be deposited on or before 7th day of November 2020.

FAQ 25 Are there any TCS return to be submitted to Income Tax Department?
Yes. TCS return shall be submitted in form no. 27 EQ within the time limit give below:

Date of ending of the quarter of the financial yearDue date
30th June15th July of the financial year
30th September15th October of the financial year
31st December15th January of the financial year
31st March15th May of the financial year immediately following the financial year in which deduction is made.

FAQ 26 By what time TCS certificate shall be issued to the buyer?
Certificate of tax collection at source shall be issued within 15 days from the due date of furnishing quarterly TDS/TCS returns.
Illustration: If TCS return is being filed for the quarter ending on 31st December,2020 then TCS certificate shall be issued on or before 30th January, 2020.

FAQ 27 Can buyer falling under section 206C(1H) make an application to the assessing officer for lower or nil rate of TCS?
No.

FAQ 28 What are the consequences on the part of Seller in case of failure to collect whole or part of TCS or after collecting, fails to pay such TCS?

  • The seller shall be deemed to be an assessee in default.
  • The seller shall be liable to pay simple interest at the rate of one per cent per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid and such interest shall be paid before furnishing the quarterly statement for each quarter.
  • The seller shall be liable to penalty of an amount equal to tax not collected.
  • The seller shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but may extend to seven years with fine. Such consequence is attracted in case of failure to pay TCS after collection of the same.

FAQ 29 Can defaulting seller be relieved from the above consequences in case buyer has filed the return of income under section 139(1) of the Act and paid appropriate income tax after incorporating the purchases made from the seller in his books of accounts?
No. Law has been specifically amended by Finance Act, 2020 not to give such relief to the sellers falling under section 206C(1H) of the Act.

FAQ 30 Is it mandatory to charge TCS in the invoice?
No.
The seller has a choice. If he wants to incorporate TCS in the Invoice, he can. Alternatively, he can raise debit note with respect to TCS amount.

Watch video on 30 FAQs on TCS here

Happy Learning 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *