Go through this article, you will find solution to all your questions.

Background

The finance minister, Smt. Nirmala Sitharaman ji has introduced the finance bill, 2020 in the Lok Sabha on 1st February, 2020. In order to widen and deepen the tax net, one of the most impactful provisions of such bill was insertion of section 206C(1H) of the income tax act, 1961 applicable from 1st October, 2020.

Bare provision of section 206C(1H) of the Income tax act, 1961

Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax:

Interpretation

1. It is applicable to Individual, HUF, Company, AOP, BOI, Partnership firm, LLP etc.
2. Person must be seller of goods and not of services. So, if a person is selling services, then there is no applicability of this section.
3. Person must receive consideration for sale of goods.
4. Receipts from buyer must exceed Rs. 50 Lakhs in current year.
5. Exports of goods (incl. Merchant Export) out of India will not counted for Rs. 50 Lakhs limit.
6. Section 206C(1H) is not triggered if section 206C(1) or (1F) or (1G) hits.
7. Section 206C(1) – TCS on sale of scrap , mineral, coal etc. Section 206C(1F) – Sale of Motor Vehicle. Section 206C(1G) – Remittance out of India under LRS) Liberalised Remittance Scheme of the Reserve Bank of India.
8. Percentage of TCS 0.1% is very nominal. (0.075% till 31st March, 2021) (Sale of Goods – Rs. 10,00,000/-, TCS – Rs. 1,000/- (Rs. 750/- till 31st March, 2021))
9. TCS needs not be charged in Invoice.
10. TCS needs to be levied on receipt basis. So, whenever you received consideration you need to collect TCS and deposit to government account. You can raise debit note of the same at each month end for receipts during month.

Practical Example

Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words "five per cent", the words "one per cent" had been substituted:

Previously, rate of TCS was 5% after this amendment rate will be 1%.

Interpretation

If buyer has not submitted PAN or Aadhar to seller, then 1% TCS is to be collected from buyer.

Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.

Interpretation

If buyer is liable to deduct TDS in any other section, then section 206C(1H) will not be applied.

General Clause

1. Buyer does not include following person:

   **So, TCS is not applicable to above mentioned person.

   • the Central Government, a State Government, an Embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State
   • a local authority
   • a person importing goods into India
2. Seller means a person whose total sales, gross receipts or turnover exceed Rs. 10 Crores during the financial year immediately preceding the financial year in which the sale of goods is made. But doesn’t include as the Central Government may by notification specify subject to such conditions as may be specified therein.

Practical Example

As on the date of this article, Government has not notified any person other than person whose turnover exceeds Rs. 10 Crores during last financial year.