The Finance Act 2020 introduced a new provision under Section 206C (1H) for the Tax Collected at Source (TCS) on Goods With effect from 1st of October 2020.
With effect from 1st October, 2020 if any seller of any goods whose turnover in the preceding FY exceeds Rs. 10 Crore then he shall be liable to collect TCS @ 0.1% of the sale value from the buyer if the buyer purchase goods for the value exceeding Rs. 50 Lacs (Limit of Rs. 50 Lac shall be seen for each buyer separately).
In other words, till the limit of Rs. 50 Lac there is no requirement to Collect TCS by the Seller. However the moment purchases of the buyer exceeds Rs. 50 Lac from the same seller then on such excess amount seller shall collect the TCS.
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.
Explanation of the Important Terms used in the Provision
Seller: 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 (Sale of Services is not covered) is carried out, not being a 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.
Buyer: Buyer means a person who purchases any goods, but does not include,—
(A) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or
(B) a local authority as defined in the Explanation to clause (20) of section 10; or
(C) 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;
Goods: “Goods” means 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 .
So if any person deals in the goods covered under the above definition then he shall be liable to Collect TCS under the newly inserted provisions.
Exceptions to Above
However, Seller is not required to Collect TCS on all the Types of sales under Section 206C(1H), there are some exceptions give to this provision, these are listed below:
- 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
- If the Seller is liable to collect the TCS under any other clause of Section 206C.
Non Availability of PAN / Aadhar of Buyer
If the Buyer does not provide his PAN or Aadhar Number then the rate of TCS shall be 1% instead of 0.1%.
Note of Caution
There is lack of clarity on the calculation of turnover in the first year i.e. whether the limit of Rs. 50 lacs starts from 1st April, 2020 or from 1st October, 2020.
It is clear that TCS is not applicable on turnover upto 30th September, 2020 but whether the turnover upto 30th September, 2020 is to be taken into account or not for calculation of the Rs. 50 lac limit is not clear.
It is suggested that by way of abundant caution you should consider the turnover of the first half of the year.