Mundle Venkatraman & Associates

An Overview Of Section 206C(1H)

By: Gauri Sham Deshpande - 24th September, 2020

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Sub section (1H) to Section 206C of the Income Tax Act, which comes into effect w.e.f. 01-10-2020, is as follows:

"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:"

Applicability

The section is applicable to:

An assessee whose total sales, gross receipts or turnover from the business carried on by him exceed Rs. 10 crores during the financial year immediately preceding the financial year in which the sale of goods is carried out.
It is applicable only on sale of goods and not on services.

The section is not applicable to:

goods being exported out of India; or
goods covered in sub-section (1) or sub-section (1F) or sub-section (1G)
- Alcoholic Liquor for human consumption
- Tendu Leaves
- Timber or any other forest products
- Scrap
- Minerals, being coal or lignite or iron ore
- Parking Lot, Toll Plaza, Mining and quarrying
- Sale of a motor vehicle of the value exceeding Rs.10 lakhs
- Foreign remittances under Liberalized Remittance Scheme (LRS), sale of overseas tour packages
The section is also not applicable 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.

"Buyer" for the purposes of this section means a person who purchases any goods, but does not include,

the Central Government, a State Government, an embassy, a High Commission, legation, 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
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;

"Seller" for the purposes of this section means all types of assessees including Central Government, State Government, Local Authority, Municipal Corporation, etc., except individual and HUF. But where a seller is an Individual or HUF and his/its books of accounts are required to be audited u/s 44AB(a) or 44AB(b) during the financial year immediately preceding the financial year in which goods are sold, then TCS is required to be collected by such Individual/HUF.

TCS is collectible by sellers –

whose total sales, gross receipts or turnover exceed Rs. 10 crores during the financial year immediately preceding the financial year in which sale of goods is carried out;
from those buyers to whom goods are sold for an aggregate value exceeding Rs.50 lakhs during the financial year; and
on that portion of sale consideration that exceeds Rs. 50 lakhs.

TCS not collectible by sellers –

Where buyer is liable to deduct TDS under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount,
If the buyer is (a) Central Government, (b) State Government, (c) A High Commission, legation, commission, consulate and trade representation of a foreign state, (d) A local authority such as Gram Panchayat, Municipality, Municipal Corporation, District Board and Cantonment Board (e) 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.
From a resident buyer who purchases goods for the purposes of manufacturing, processing or producing any article or thing (or for the purpose of generation of power) and not for the purpose of trading and buyer gives a declaration in duplicate in Form 27C to the seller.
Generally, retailers need not collect TCS because their customers purchase for personal consumption. TCS shall be required to be collected where buyers purchase goods for any purpose other than personal consumption.

How much to be collected

A seller shall collect a sum equal to 0.1% of the sale consideration exceeding Rs. 50 lakhs

Where buyer can't provide PAN or Aadhaar Number to the seller TCS shall be collected @1% instead of 0.1%.

In case of TDS, tax is required to be deducted on value excluding GST, whereas under TCS, collection is required to be made on invoice value including GST (Relief granted vide Circular No. 01/2014 dated 13.01.2014 and as amended by Circular No. 23/2017 dated 19.07.2017 is only in respect of TDS and not for TCS);

When is the TCS to be collected

TCS shall be collected by the seller at the time of receipt of sale consideration from buyer.

Compliances

TCS collected during the month has to be deposited with the Government on or before the 7^th of the following month.

TCS returns are to be filed quarterly on or before the 15^th day of the month following the quarter.

The due date for depositing TCS for the month of March is 7^th April unlike TDS which is to be deposited on or before 30^th April.

In case of non-compliance Interest, late fee as applicable to default of TDS will apply to TCS as well.

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