The government has introduced a new section 206C (1H) through Finance Act 2020 to extend the TCS provisions to the seller of goods. As per this provision, a seller whose turnover is above Rs 10 crore is required to collect tax, when he receives more than Rs 50 lakh from one buyer during a financial year. It is to be noted that the TCS should be collected at the time of receipt of the amount.
Points to note:
- This provision applies only to a seller whose gross turnover exceeds Rs.10 crore during the financial year preceding the FY in which such sale is carried out.
- Goods do not include exports and goods covered under section 206C(1)- TCS on sale of alcohol, tendu leaves, forest produce and scrap; 206C(1F)- TCS on sale of motor vehicles and 206C(1G)- TCS on foreign remittance.
- TCS is not required to be deducted if the buyer is a Central/State Government, Embassy, High Commission, Legation, Consulate, Trade Representation of Foreign State or any local authority.
- If the buyer is required to deduct TDS under any other provisions of the Income Tax Act on the goods purchased by him from the seller and has deducted such amount, then the seller is not required to collect TCS on such transactions.
- This provision does not apply to the import of goods to India.
Calculation of TCS and effective dates:
This provision is applicable from 1st October 2020. A seller is required to collect tax at source at 0.1% on receipt of consideration of value exceeding Rs.50 lakh in a financial year from the buyer. (This rate is reduced to 0.075% till 31st March 2021 due to COVID-19).
Also, the threshold of Rs.50 lakh is for the whole financial year. Thus, if the seller receives any sale consideration from the buyer from 1st April 2020 to 30th September 2020, the same will be considered for calculating the limit of Rs.50 lakh for that buyer.