Dhiraj Shubham & Co LLP

A new section 206C(1H) has been introduced through Finance Act, 2020 to collect Tax Collected at Source (TCS) with effect from 1st October 2020.

1. Who is liable to collect TCS?

Any seller of any goods whose total sales/gross receipts/turnover from the business carried on by him exceed INR 10 crores during the previous financial year shall be liable to collect TCS.

This section is applicable only to sale of goods and not services. Goods is not defined in Income tax Act, 1961, however as per Goods and Service Tax Act, 2017 goods mean every kind of movable property other than money and securities but includes actionable claims, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

For the seller to collect the TCS on the selling of goods INR 10 Crore Limit shall be Consider each year. If in the preceding FY Turnover exceed Rs. 10 Cr only then this provision shall be applicable otherwise not.

2. What is the threshold limit to collect TCS?

The threshold limit is INR 50 lakhs for each buyer during the financial year. In other words, up to the limit of INR 50 Lakhs there is no requirement to Collect TCS by the Seller however once the amount exceeds INR 50 Lakhs TCS has to be collected on such excess amount from the seller. However, in the First year of implementation of this new provision Sale made to buyers up to 30th September 2020 shall not be liable to collect the TCS.

Buyer: Buyer means a person who purchases any goods, but does not include,

  • The Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or
  • A 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;

The limit of INR 50 Lakhs shall be applicable for every year. Suppose in the year 2020-21 Seller Mr X collects the TCS from the buyer Miss Y but in the next year Miss Y buys goods only for Rs. 25 Lacs from Mr X, then it cannot be said that as in the last year i.e. in the year 2020-21 TCS was Collected from Miss Y and hence it has to be collected in the succeeding years also irrespective of the amount of buying.

Example: Sale of Goods to Mr X from April, 2020 to September 2020 is INR 75 Lakhs. So TCS will be applicable only on sale made on or after 1st October 2020 and the sale made over and above 50 lakhs from April to September 2020 will not be considered.

3. Rate of TCS?

The rate of TCS applicability is 0.1% on the same value of goods. The revised rate up to 31st March 2021 is 0.075%.
Example: Sale of Goods to Mr X INR 10,00,000 plus 18% GST. Invoice Bill calculation is as follows:

Particulars Amount (INR)
Taxable Value 10,00,000
CGST 9% 90,000
SGST 9% 90,000
TCS @ 0.075% 750
Total Amount 11,80,750

It must be note that if the Buyer did not provide his PAN or Aadhar Number then the rate of TCS shall be 1% instead of 0.1% (Rate will be 0.075% till 31.03.2021).

4. When the seller is not required to collect TCS?

If the Goods are Exported out of India.
If the goods are of such type on which TDS is liable to be deducted by the buyer (Like in case of Job Work, Composite Supply).
If the Seller is liable to collect the TCS under any other clause of Section 206C. (Sale of Motor Vehicle dealer he shall collect the TCS on the motor vehicles if the value of the vehicle exceeds Rs. 10 Lac).

5. Due date of Payment and date of filing TCS Returns?

The due date of Payment of TCS is 7th of the following month. The due date of filing of TCS Return (Form 27EQ) is 15th of the following quarter and for quarter ending March it is 31st May of the following year. However, for FY 2020 -21 the government has extended the return filing due dates:

Quarter Period Last Date of Filing
1st Quarter 1st April to 30th June 31st March 2021
2nd Quarter 1st July to 30th September 31st March 2021
3rd Quarter 1st October to 31st December 31st Jan 2021
4th Quarter 1st January to 31st March 31st May 2021

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