Published on 04-01-2023
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TCS U/S 206C(1H) OF INCOME TAX ACT ON SALE OF GOODS
Provision of the Income Tax Act “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.”

Where total turnover is more than Rs.10 crores in the previous financial year and receives sale consideration of any products of more than Rs.50 lakhs, such seller must collect TCS upon receiving consideration from the buyer on such amount over and above Rs.50 lakhs, as per Section 206C(IH) is 0.1% .(Without PAN, then 1% is TCS)

CATEGORY OF PERSON UNDER TCS
No TCS is required when the buyer is from the following category:
Central Government
State Government
Embassy
Commission/High Commission Legation
Consulate
Trade Representation of Foreign state
Local Authority

QUALIFYING AMOUNT
The amount on which the tax needs to be collected shall be limited only to the consideration for sale of goods actually received. The liability is triggered at the point of receipt of amount once the threshold of Rs.50 Lakhs is crossed. In the absence of sale of goods and amount received, the liability does not exist. The sale consideration can be interpreted as amount received in advance or in arrears.

PROVISION AND RULES
These provisions are applicable only in respect of transaction of sale of goods and do not apply to sale of services.

Exempted transactions: If the buyer is liable to deduct tax at source on goods purchased by him and the buyer has deducted the amount then the seller is not required to collect TCS on such transactions. Both the conditions need to be fulfilled i.e., the buyer should be liable for deduction of tax at source and has deducted such amount.

TCS is not required to be collected in respect of Export sales as the consideration for sale of goods excludes consideration towards goods exported out of India and even the definition of buyer excludes a person importing goods from India. Also this section is not applicable where other TCS sections applies.

Cancellation of sale- When advance is collected for sale of goods and TCS is remitted and subsequently the contract is cancelled and the amount is refundable. In such cases, the seller may only refund the primary sale consideration received and not the TCS amount.

TCS collected and disclosure in TCS return:
The amount collected as TCS by the seller (other than an office of the Government) shall be paid to the credit of the Central Government within one week from the last day of the month in which the collection is made. These transactions are to be reported by the sellers in Form No. 27EQ.

Impact of Credit notes and Debit notes: If the amount of consideration is already received and TCS is collected and paid, no impact thereof will be required to be made at the time of passing entry for sales return/credit note/debit note.

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