TCS U/S 206C(1H)- TCS ON SALE OF GOODS

SECTION 206C(1H): TCS ON SALE OF GOODS

1. What do you mean by TCS?

TCS stands for Tax collected at Source. TCS is a kind of tax that is collected by the seller from the buyer on sale of certain type of goods if the amount exceeds a specified limit, so that it can be deposited to the government.

TCS is required to be collected at the source if the value of transaction exceeds a specified amount.

The purchaser can claim this tax collected by the seller while paying his income tax liability for the year, and if the TCS collected is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TCS was to reduce the Tax evasion by the person receiving the income.

Note: -

Seller- A seller who sells specific goods and is responsible for collection of tax from the purchaser.

Purchaser- A purchaser is the person who buys specific goods from seller is responsible for paying TCS amount to seller.

2.  What is TCS under Section 206C(1H) of Income Tax Act?

Section 206C(1H) of Income Tax Act, 1961 mandates the collection of tax at source (TCS) sale of goods other exports by sellers from buyers.

3. Who is a buyer as per Section 206C(1H)?

A buyer as per Section 206C(1H) refers to a person who purchases goods amounting to over Rs. 50,00,000 from a person required to collect TCS under this section. However, it does not cover the buyer in case of: -

• Exports.
• Imports.
• Goods covered under Section 206C(1) i.e. TCS on sale of alcohol, tendu leaves, timber, forest produce, scrap and minerals.
• Goods covered under Section 206C(1F) i.e. TCS on sale of motor vehicles.
• Goods covered under Section 206C(1G) i.e. TCS on foreign remittance.
• The buyer being Central/ state government, Embassy, High commission, Legation, Consulate, Trade Representative of foreign state or any local authority.

4. When is TCS to be collected under Section 206C(1H)?

TCS requirement arises:

• Debiting the money payable by the buyer to their accounts in books.

            Or

• Upon receipt of such money from the buyer in any mode, whichever is earlier.

Few examples of date of collection are: -

5. Who is required to collect TCS under Section 206C(1H)?

Any person whose turnover in the previous financial year is more than Rs. 10 crores and in cases where they receive payments in aggregate towards the sale of goods amounting to more than Rs. 50,00,000 from a buyer during the Financial Year.

NOTE: -

The provision of Section 206C(1H) is not applicable to non- resident Individuals.

Example: -

Navneet motors, Mumbai is an authorized dealer of Tata Motors. Tata motors sold 200 cars to Navneet motors in P.Y 24-25 and the total consideration received is Rs. 150 crores. Explain TCS requirement?

In this case Navneet motors will be required to deduct TDS of Tata Motors @ 0.1% in excess of Rs. 50,00,000 u/s 194Q because in case both 194Q and 206C(1H) applies to a particular transaction then the preference will be given to TDS u/s 194Q.

.

6. Rate of TCS under Section 206C(1H)?

The TCS rate under this Section is: -

7. Exemption under Section 206C(1H)?

No TCS if: -

• Goods are exported out of India.
• Goods are imported into India.
• Goods covered under Section 206C(1) i.e. TCS on sale of alcohol, tendu leaves, timber, forest produce, scrap and minerals.
• Goods covered under Section 206C(1F) i.e. TCS on sale of motor vehicles.
• Goods covered under Section 206C(1G) i.e. TCS on foreign remittance.
• The buyer being Central/ state government, Embassy, High commission, Legation, Consulate, Trade Representative of foreign state or any local authority.
• TDS is deducted under any other section.

8. Time limit for deposit of TCS under Section 206C(1H)?

The due date for deposit of TCS is as below: -

9. What is the due date for filing of TCS return under Section 206C(1H)?

TCS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates: -

10. Type of TCS return & form to be issued?

TCS under this section has to filed quarterly through FORM 27EQ and the collector has to issue FORM 27D to the buyer within 15 days of filing of return.

11. Fees/ Penalties for Late/ Non- Filing of TCS u/s 206C(1H)?

Following penalties/fees will be levied if there is delay in TCS collection or delay in deposit of TCS or non-filing of quarterly return.

12. FREQUENTLY ASKED QUESTIONS?

Q. What is the threshold limit for TCS under 206C(1H)?

A. The threshold under Section 206C(1H) is Rs. 50,00,000 in aggregate.

Q. Is Section 206C(1H) applicable when the buyer is a non-resident?

A. Yes, this section does apply when the person is non-resident.

Q. Should the GST amount be considered for calculating TCS?

A. As per circular 17 of 2020 issued by CBDT, no GST adjustments should be made for calculating TCS due to indirect taxes or discounts as tax is deducted on receipt of consideration and not the sale.

Few Important Points.

1. The TCS is to be collected on buyer basis. The threshold limit u/s 206C(1H) is Rs. 50,00,000 in a Financial Year. So, you have to collect @ 0.1% on over and above Rs. 50,00,000.
2. Sales by a SEZ unit is considered as deemed sales. Still, TCS is applicable on the same if the amount received from a buyer crosses Rs. 50 lakhs during the Financial Year.
3. TCS u/s 206C(1H) does not cover sale of services.