What is TCS?

The tax payable by a seller which is collected from the buyer at the time of sale is called as Tax Collection at Source. The provisions of TCS is governed by Section 206C of the Income Tax Act, 1961 which mandates that a specified seller is liable to collect tax at specified rates on certain goods at –

Budget 2020 has introduced a new Sub-Section 206C (1H) for TCS on Sale of Goods with effect from 01/04/2020.

However as per the amendment to Finance Bill 2020, the applicability of the new TCS provision has been deferred from 1st April 2020 to 1st October 2020.

With a view to resolve the queries arising in interpreting the new provision, the Board has been authorised to issue guidelines which will be placed before the Parliament and shall be binding on those liable to collect such TCS as well as the IT Authorities.

TCS will be applicable at the rate of 1% if PAN/ Aadhar has not been provided to the seller

Who is a buyer for the purpose of this sub section?

Buyer refers to any person who purchases the 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
• • any other person as the Central Government may specify, by notification in the Official Gazette

EXEMPTION FROM TCS

There is no need to collect TCS provided the following two conditions are satisfied-

Example for applicability of TCS

Say PQR Ltd, has a turnover of Rs 25 Crore in the FY 2019-20. It receives a consideration of Rs 82 lakhs in FY 2020-21 for the sale of goods. What will be the TCS applicability?

In the above case since the turnover in FY 2019-20 exceeds Rs 10 Crore, the provisions of Section 206C (1H) gets attracted. TCS has to be collected at 0.1% on 32 lakhs (82 lakhs – 50 lakhs) which amounts to Rs 3200.

Is TCS to be collected on the GST on sale value including or excluding GST?

A clarification is yet to be received from CBDT as to whether TCS is to be collected on the sale value inclusive of GST or by excluding it. Until such clarification is received it is preferable to collect TCS on the GST amount as well.

Whether export of goods is also covered under the ambit of TCS?

It is hereby clarified that the levy of TCS as per Section 206C (1H) shall not apply to import and export of goods. Such exclusion in line with NASSCOM’s recommendation comes as a relief to those engaged in exports and also to non-resident sellers for imports into India due to reduced compliance burden with respect to filing of income tax returns and claiming TCS refund.

Compliance requirements

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