Note on section 206C(1H) of the Income-tax Act, 1961 – Tax Collection at Source (‘TCS’) on sale of goods
Background:
Finance Act 2020 has inserted new section 206C(1H), effective 1 Oct 2020, wherein TCS @ 0.1%1 of the sales consideration is required to be collected from a buyer, at the time of receipt of such consideration, if sale of goods exceeds INR 50 Lacs in the Previous Year.
Relevant extract of the provision [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, other than the 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:
Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words “five per cent.”, the words “one per cent.” had been substituted:
Applicability: This provision is applicable in following circumstances:
- It is applicable to all the sellers which are engaged in making sales. The term “seller” has been defined in the act.
- The term “seller” means a person whose total sales, turnover or gross receipts from the business carried on by him exceeds ₹10 Crores during the financial year immediately preceding financial year.
- All the sellers are covered under the ambit of this section which have a turnover/sales/gross receipts exceeding ₹10 Crores in year 2019-20 will be required to collect TCS in year 2020-21.
- If any person has turnover/sales/gross receipts below the abovementioned limit then it is out of scope of the term ‘seller’ means the provision of this section shall not be applicable on that type of Assessee.
- The applicability criterion for TCS has to be considered & checked for Every Year.
Non-Applicability: The provisions of this section shall not be applicable in the following circumstances:
- This section is not applicable for export of goods & goods already been covered under the existing provisions governing TCS under chapter XVII-BB of the Income Tax Act, 1961.
- This section is not applicable in a case where value or aggregate value of sales consideration is below or equal to ₹50 lakhs during the year.
- This section is not applicable if the buyer is CG/ SG/Local Authority/ an Embassy / High Commission / Consulate & the representation of foreign states.
- This section is not applicable on a buyer which is importing goods. This section is not applicable on a person which is notified by Govt.
