CA. Ajay Khandelwal
TCS is already applicable on sale of some specified goods under Section 206C. But, it has been made applicable on all goods by inserting sub-section 1H if certain conditions are fulfilled. TCS on purchase of goods is governed by Section 194Q. But, this section 206C(1H) deals only with TCS on sale of goods.
Applicable to Sellers only
This new provision is applicable to only those sellers whose gross turnover or gross receipts or sales in previous year was more than Rs. 10 Crores. So, if a seller has sold goods to a single buyer for an amount exceeding Rs. 50 lacs in current year, then he has to collect TCS from such seller.
Rate of TCS
Rate of TCS in this section is 0.10% on the amount in excess of Rs. 50 lacs. So, upto Rs. 50 lacs, no TCS is required to be deducted under this section. However, if the seller doesn’t provide PAN no or Aadhar No, then 5% TCS rate will be applicable.
Date from which applicable
This provision of TCS on sale of goods is applicable from 1st October, 2020. But, for counting the threshold of Rs. 50 lacs, purchase from 01.04.2020 to 30.09.2020 will also be counted.
For example, if Mr. A whose turnover exceeded Rs. 10 Crore in 2019-20, sold goods of Rs. 40 lacs upto 30.09.2020 to Mr. X. Now, if he sells goods of Rs. 20 lacs in October 2020, then TCS @ 0.10% will be collected on Rs. 10 lacs, i.e., on balance after Rs. 50 lacs. Similarly, if he sold goods of Rs. 1 Crore to PQR Ltd. upto 30.09.2020 and of Rs. 30 lacs in October, 2020, then he has to collect TCS on Rs. 30 lacs only. This is because, the provision is applicable from 1st October, 2020. However, the sales before 1, October, 2020 will be counted for the threshold limit of Rs. 50 lacs because TCS is applicable after Rs. 50 lacs.
If both TDS and TCS are applicable
If there is such a transaction in which both TDS under above provisions and TCS under Section 206C(1H) are applicable, then above TDS provision will only prevail. For example, if Mr. A & Mr. B had turnovers exceeding Rs. 10 Crores last year. Now, if Mr. A sells goods of Rs. 1 crore to Mr. B. So, provision of TCS u/s 206C(1H) is applicable on seller Mr. A and provision of TDS u/s 194Q is applicable to Mr. B. In such case, both are not required to deduct TDS and TCS. Instead, only Mr. B, the buyer is required to deduct TDS under Section 194Q.
Now, there may be a situation when TCS has already been collected by a seller before the buyer could deduct TDS u/s 194Q. It has been clarified by CBDT that in such a case, TDS u/s 194Q is not required to be deducted again because of same tax rates. (Circular No. 13 of 2021).
Non-applicability of above provisions
In addition to above explanation, this Section 206(1H) of TCS is not applicable in following cases :
- Sales of services not involving any goods.
- Export of Goods out of India.
- Import of Goods in India if seller has no PE in India.
- Where TDS is already required under any other provision of Income Tax Act.
- If buyer is Govt. or local authority.
- When TCS is already required under any other provision of Income Tax Act. For example, if Mr. A & Mr. B have turnover exceeding Rs. 10 Crore. Now, if Mr. A sells Car of Rs. 1 Crore to Mr. B. So, here Mr. A will not collect TCS u/s 206C(1H). Rather, Mr. A will collect TCS @ 1% because sale of Motor Vehicle of value exceeding Rs. 10 lacs is already covered under TCS provisions u/s 206C(1F).
What is included in 10 Crore Limit
The sales or gross receipts or turnover from business carried on by a person is only included in threshold limit of Rs. 10 Crores. Thus, the receipts from non-business activity is not included. For example, if sales of a person in last year was Rs. 90 lacs and he sold a land attracting capital gain for Rs. 20 lacs. Thus, he will not be covered as sale of land is a non-business activity here.
Interplay of Section 194-O, 194Q and 206C(1H)
In such a case, where there is combination of applicability of any 2 or more of above sections, Section 194-O will be given priority over 194Q and 206C(1H) . Even if TCS has already been collected by seller u/s 206C(1H), E-Commerce operator has to deduct TDS u/s 194-O. This is because the rate of TDS u/s 194-O is higher than TCS rate u/s 206C(1H).
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Disclaimer : The above post has been prepared to share the scope and implications of Section 206C(1H) of the Income Tax Act, 1961 and related provisions. Though every effort has been made to avoid errors or omissions in this document yet any error or omission may creep in. Therefore, it is notified that I shall not be responsible for any damage or loss to any one, of any kind, in any manner therefrom. I shall also not be liable or responsible for any loss or damage to any one in any matter due to difference of opinion or interpretation in respect of the text. On the contrary it is suggested that to avoid any doubt the user should cross check the law and the contents with the notified / gazetted materials.