TCS on sale of Goods- Section 206C(1H) w.e.f. from 01.10.2020 : Overview with Illustrations

To widen and deepen the scope of early collection of revenue to the Government, Finance Bill, 2020 brought in levy of TCS (0.1% or 1% in case PAN/Aadhaar not provided by Buyer) on sale of goods for which sales consideration. Sub section 1H has been inserted in Section 206C by Finance Act, 2020 for collection of TCS by the seller on sale of ANY GOODS. This means it is not applicable to any specified goods but to all goods.

Please note that TCS Rate is been reduced to 0.075% for the period from 01.10.2020 to 31.03.2021 due to the COVID-19 pandemic

WHO HAS TO COLLECT??

TCS to be collected by seller. Seller means a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs.10 crore during the financial year immediately preceding the financial year in which the sale of goods is carried out, not being a person as the Central Govt. may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein

WHOM TO COLLECT TCS FROM??

TCS to be collected from such buyers to whom value or aggregate value of goods sold exceeds fifty lakh rupees in a previous year.

Note 1: For the purpose of calculating threshold of Rs. 10 crores total sales, gross receipts or turnover from the business is to be taken into consideration i.e. sale of goods and services both shall be considered for calculating threshold of Rs.10 crores.

Note 2: For the purpose of calculating threshold of Rs. 50 Lakhs only sale of goods is to be taken into consideration.

TIME OF COLLECTION OF TCS??

TCS is to be collected at the time of actual receipt of consideration by the seller.

Note 3: In my personal opinion TCS should be collected in the 'sales invoice' itself so as to enable buyer to know about the applicability of levy. Merely charging TCS in sales invoice does not trigger liability for payment. TCS liability is to be discharged only when the sales consideration for sales effected on or after 01-10-2020 is received.

EXCLUSION- WHEN TCS IS NOT APPLICABLE??

1) TCS provisions are not applicable on Export of Goods.

2) TCS provisions are not applicable where buyer is CG, SG, Local authority, Embassy, Commission or Consulate etc

3) TCS provisions are not applicable on sale of goods which are already covered under other sub-sections of S.206C viz. Liquor / Scrap sales, Motor Vehicles etc.

4) TCS provisions are not applicable where buyer is required to deduct TDS on such purchases

Applicability of Provisions in Transitional period:

Before moving towards the illustrations, let us understand the Application of the provision during the transitional period

Sl. No	Date of completion of sale	Date of receipt of sale consideration	Remarks
1	Before 1.10.2020	Before 1.10.2020	No TCS is to be collected since section 206C(1H) is made applicable from 1st October, 2020
2	On or after 1.10.2020	On or after 1.10.2020	TCS to be collected at prescribed rate subject to threshold limit
3	Before 1.10.2020	On or after 1.10.2020	Since sales were carried out in the period when provisions of section 206C(1H) were not applicable, therefore, this sub-section shall not get triggered on receipt of amount from debtors standing in books as on 30.9.2020
4	On or after 1.10.2020	Before 1.10.2020	Advance payments cannot be considered as ‘consideration for sale of any goods. Advance payments are payments received against ‘agreement to sell’ only. Section 206C(1H) will get triggered when such advance shall be appropriated against sale after completion of sale. Therefore, in this case TCS will be collected by the seller.

 

Illustrations: For better understanding let us take a look on the following illustrative

Seller: Rohit Manufacturing Pvt Ltd. (Assume T/o exceeds 10Cr in PY 19-20 and 100% Sale is on Cash Basis i.e no Credit Sale. Further receipts are on FIFO Basis)

Buyer: Kiara Automobile Pvt Ltd.: Assume PAN has been provided to Seller

S.NO	Sales up to 30-09-2020	Sales after 01-10-2020	Sales consid-eration received up to 30-09-2020	Sales consid-eration received on or after 01-10-2020	Whether TCS is appli-cable for FY 2020- 2021? (YES / NO)	Sales consid-eration (exce-eding INR 50,00,000) on which TCS is payable	TCS Liability @ 0.075% / 0.75%	Remarks
1	18 Lac	72 Lac	15 Lac	65 Lac	Yes	27 Lac	2,025	Rs. 300000 receipt post received post 30.09.2020 pertaining to period prior to 30.09.2020 will not attract TCS
2.	52 Lac	45 Lac	52 Lac	45 Lac	Yes	45 Lac	3,375	Limit of INR 50 Lakhs already exceeded prior to 30-09-2020. Hence, each sales consideration received for sales made after 01-10-2020 is liable for TCS.
3.	58 Lac	56 Lac	3 Lac	51 Lac	No	-	-	Receipts are from outstanding as on 30-09-2020 and consideration not received for sales effected after 01-10-2020 hence, TCS is not payable.