Another
section was introduced under Finance Act, 2020 under the TCS chapter which will
be effective from 1st Oct, 2020 i.e. Sec. 206(1H) which is related
to collection of tax on sale of goods.
Let
us understand each aspect of this section as the context of Bare-Act reads
along with some practical difficulties which can be faced by people.
Ø
Applicability
|
(A) |
Person who will collect TCS |
Seller whose turnover exceeded ₹ 10
crores in the Financial Year preceding the financial year in which sales
was made. (For sales made in FY 20-21, turnover for FY
19-20 will be considered. Therefore, business
started in FY 20-21 won’t be liable to collect TCS for the period from
1.10.2020 to 31.03.2020) |
|
(B) |
Person from whom TCS will be collected |
Buyer to whom sales (excluding sale of
services or export sale) exceeding ₹ 50 Lakhs is made in a year. Please note that applicability
of TCS to be checked on PAN India basis and not on GSTIN basis In case of below mentioned persons, TCS
would not be collected even if sale exceed ₹50 Lakhs: ·
Central
Government, a State Government, an embassy, a High Commission, legation,
commission, consulate and the trade representation of a foreign State, local
authority or any other person specified. |
Ø Rate, Amount & Time of collection: TCS shall be collected @ 0.1% on amount of sale exceeding ₹ 50 Lakhs (i.e.
if total sales is ₹ 75 Lakhs, then TCS will be collected only on ₹ 25 Lakhs
i.e. amount above ₹ 50 Lakhs).
However, till 31.03.2021, rate
of TCS would be 0.075% as per announcement by CBDT on 13.05.2020 regarding 25%
reduction in all TCS and TDS rate.
If PAN or Aadhar number not available, then rate of TCS will be 1%.
Liability of TCS shall arise when sale of
goods is made above ₹50 Lakhs to a single buyer but time of collection would be
at the time of receipt of consideration.
Due date of deposit of TCS will be 7th
of the following month in which TCS was collected from buyer.
Ø
Exceptions:
TCS provisions under
this section will not be applicable in case of sale of following goods:
|
ITEMS |
Section for TCS |
|
·
Alcoholic
Liquor for human consumption ·
Tendu
leaves ·
Timber
obtained under a forest lease ·
Timber
obtained by any mode other than under a forest lease ·
Any
other forest produce not being timber or tendu leaves ·
Scrap ·
Minerals,
being coal or lignite or iron ore |
Section
206C(1) |
|
Motor Vehicles (if the value exceeds ₹ 10
Lakhs) |
Section
206C(1F) |
|
·
Sum of
money (above 7 Lakhs) for remittance out of India ·
Seller
of an overseas tour program package |
Section
206C(1G) |
Ø
Some
Practical difficulties:
1.
It would
be difficult to keep track of amount to be collected at the time of receipt of
payment hence it can be advised to collect TCS at the time of sale.
2.
Now,
people will have to make separate invoice for sale of goods and services for
one buyer, as this TCS is only applicable on sale of goods or find a way to
differentiate between both sales. Further, at the time of receipt there needs
to be a bifurcation for amount received against goods and services for proper
collection of TCS.
3.
In case
of sale return there can be an issue where the amount of sales gets below the
actual amount and return is received after the TCS return is filed and, in that
case, the only option available with seller would be to revise return and claim
refund.
4.
This
section is being made applicable from 01.10.2020 and tax collection should
be prospective in nature and not retrospective. However, since the
collection of tax or point of tax collection is receipt of sale consideration.
Hence, many people are considering that if a sale which was made before
01.10.2020 but for which consideration is received after 01.10.2020 TCS shall
be applicable on same if all other conditions are met.
However, if
the above approach is accepted it will become really difficult in a situation
where a sales was made before 1 year or 2 year and amount is received now
because all the other conditions needs to be checked in respect to that
financial year when sale was made as seller definition and liability of TCS
also needs to be checked when that particular sales is made.
For e.g.:
If a person had sold goods to a person in FY 2019-20 of Rs. 70 lakh for which
payment is received on 01.11.2020 then in that case one needs to first check
whether the seller fulfills the definition of seller during that sales as the
definition of seller says ““seller” means a person whose total sales, gross
receipts or turnover from the business carried on by him exceed ten crore rupees
during the financial year immediately preceding the financial year “in which
the sale of goods is carried out,”. Hence it will be confusing and cumbersome
if sale made before 01.10.2020 is brought under ambit of this TCS.
Many experts are
also suggesting that one should collect TCS even on the receipt received after
01.10.2020 for sale made before 01.10.2020 as the amount won’t be much and so
that there is no future penalty for non collection.
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