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Section 206C (1H)

Introduction

The Finance Act, 2020 has introduced a new sub-section i.e., (1H) under Section 206C of the Income Tax Act, 1961.
This section deals with the provisions of Tax collected at source on sale of goods to buyer.
The said section shall be applicable from 1.10.2020.


What is TCS?

TCS is Tax collected at Source which is collected by seller from the buyer.


Provision

When seller sale goods to the buyer of any amount exceeding fifty lakhs rupees individually or in aggregate, in any previous year, he needs to collect tax from buyer a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakhs as Income-tax.

The Provision of this sub-section shall not be applicable if the buyer is liable to deduct tax at source (TDS) under any other provision of this Act and has deducted such amount.


Who is Seller?

Seller means a person whose total sales, gross receipts or turnover from the business exceed Rs 10 crore during the financial year immediately preceding the financial year in which the sale of goods is carried out.

It will not include 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.


Who is buyer?

Buyer means a person who purchases any goods but it will not include:

  • The Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State;
  • A local authority as defined in the Explanation to clause (20) of section 10; 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;

Exceptions

The Sub-section (1H) shall not be applicable on the following sales:

  • Goods exported out of India;
  • Goods covered under section 206C (1), i.e., Scrap, Tendu leaves, Alcohol Liquor for human consumption, Timber, Any other forest product etc.
  • Goods covered under section 206(1F), i.e., Motor Vehicles;
  • Goods covered under section 206(1G), i.e., Authorised dealer for remittance of money outside India under Liberalised Remittance Scheme (LRS) of RBI.

Non-availability of PAN/AADHAAR

The Rate of TCS is 0.1 Per cent, if the buyer furnishes his PAN/ AADHAAR. Where the Buyer fails to furnishes his PAN/AADHAAR the rate of TCS collected shall be @ 1% instead of 0.1%.


Who is Liable to Collect TCS and When?

As like other TCS provisions, Seller are liable to collect TCS.

Liability of seller to collect TCS from buyer arises on the day when he receives the payment from sale of goods.

Due-date of Deposit of Tax collected on goods

  • The Seller has to deposit the tax collected on monthly basis.
  • On or before 7th of the subsequent month, the seller needs to deposit the tax collected during the month.
  • The tax needs to be deposited to the credit of Central Government.

What are the consequences of Non-collection or Non-Payment?

If the seller fails to collect the tax at specified rates or fails to pay the tax collected to the Government, he shall be liable for interest at the rate of 1% per month (or part thereof) from the date of collection to date of payment.

When to file TCS Return?

  • Tax Collector has to submit its return on Quarterly basis.
  • The Return shall be in Form 27EQ disclosing PAN Wise details of respective buyers and TCS collected from them.
  • TCS Return shall be submitted on or before 15th Day from the end of quarter in which the tax was collected. For March quarter the due date for filing TCS Return is on or before 15th May.

What are the consequences of delay filing of TCS Return?

Late fee of Rs. 200 per day shall be chargeable during which the default continues, subject to maximum the amount of tax collected.


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