As we know various new compliances are going to start to from 01.10.2020 in Income tax and GST, one of which is section 206C(1H) i.e. TCS on sale of goods which is going to have a huge impact on many people.
After our post on 206C(1H) we have received many queries on our chat service, e-mail and comments. Thus, we decided to make an FAQ based on the questions received and what are our views on that questions.
Few FAQ’s on this section are as below along with our opinion on the same:
1. To whom this section is applicable?
A. Each seller who is selling goods and has turnover of Rs. 10 crore or more during previous financial year has to collect TCS on sale of goods.
2. How to calculate turnover?
A. The turnover would include sale of goods as well as services of the business carried on by him, further amount of GST should be also included in this turnover as the same will be included in the amount of sale for TCS until further clarification.
3. From whom to collect TCS?
A. TCS shall be collected from all buyer to whom sale has been made exceeding Rs. 50 lakh in a year except:
- Central Government, State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or
- local authority as defined in the Explanation to clause (20) of section 10; or
- a person importing goods into India or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
- Export buyer i.e. export sales won’t be included.
4. Will a PSU (i.e. public sector undertaking) selling to another PSU be covered under this provision?
A. Since there is no specific exclusion of PSU’s, from the definition of buyer or seller TCS needs to be collected on transaction between 2 PSU.
5. From when is this applicable?
A. This TCS shall be applicable from 01.10.2020.
6. Do we need to consider sale made before 01.10.2020 for calculating TCS liability?
A. Yes sale made before 01.10.2020 shall be considered for calculating total sale made to one party. For eg: If total sale made to one person between 01.04.2020 to 30.09.2020 is Rs. 50 lakh and after 01.10.2020 sale of Rs. 5 lakh is made then TCS shall be collected on such Rs. 50 lakh.
7. Will TCS be collected on advance received after 01.10.2020 for sale of goods?
A. The trigger point of TCS is sale of goods, thus until goods are sold no TCS is required to be collected on advance. However to be on a safer side if you are doing regular business with a person and he provides you advance for sale then it is advisable to collect TCS on such advance.
8. Will TCS be applicable on sale of service?
A. No this TCS is only applicable on sale of goods and not sale of service.
9. Will sale of service included in turnover?
A. Sale of service shall be included for calculating Rs. 10 crore turnover of previous financial year of seller but will not be included for calculating Rs. 50 lakh turnover of each buyer.
10. Will GST amount be included in turnover value?
A. Yes as of now GST amount will be included in value of sale, turnover until further clarification from government as notification 01/2014 was for TDS purpose and not TCS purpose.
11. Will TCS be collected for sale made before 01.10.2020 but payment received after 01.10.2020?
A. Although here the trigger point of collection of tax is receipt of payment for sale but our opinion is that such TCS shall only be applicable on sale made after 01.10.2020, otherwise one will have to even collect and check the conditions for sale made before 2 year amount for which is received after 01.10.2020, which won’t be prudent.
12. What is the rate of TCS?
A. Rate of TCS is normally 0.1% where PAN is available and 1% where PAN is not available but for transaction between 14.05.2020 to 31.03.2021, rate of TCS would be 0.075%.
13. Will TCS be applicable in a case where scrap is being sold on which TCS is not being collected u/s 206C(1) because of Form 27C?
A. Section 206C(1H) states that TCS under this section shall not be applicable on goods covered in sub-section (1) or sub-section (1F) or sub-section (1G). It no where mention that TCS needs to be collected. Thus, even if TCS is not collected on such goods but if they are covered under this sub section no TCS shall be collected u/s 206C(1H).
14. Will TCS be collected on export sale?
A. Export sales have been specifically removed from this sub section. Hence no TCS on export sales.
15. Will TCS be applicable on business started in FY 2020-21?
A. No since the turnover for such business in previous financial year shall be zero i.e. below 10 crore, TCS shall not be applicable.
This are the questions that were most asked to us and we have tried to provide our opinion and the answers mentioned above are personal opinion of the author and has no legal binding.
If you have any further queried feel free to comment down below.