A new sub-section(1H) was inserted by the Government of India in the section 206C of the Income Tax Act on September 2020 through the vide circular 17/2020 Finance Act mandates the mentioned subsection with the effect from 1st day of October 2020.
What is Section 206C?
Under this section, Tax Collected at Source (TCS) is collected on specified goods like Alcoholic Liquor for human consumption, forest produce, and scrap, etc.
Section 206C- Profit and Gains from the business of trading in alcoholic liquor, forest produce, Scrap :
Every person who is a seller should collect from the buyer of any goods of nature which is specified in the below, a sum equal to the percentage, specified in the column.
|Sr.No.||Nature of goods||Percentage|
|1||Alcoholic Liquor for human consumption||1|
|3||Timber obtained under a forest lease||2.5|
|4||Timber obtained in any other mode||2.5|
|5||Any other forest produce not being||2.5|
|7||Minerals being coal, lignite or iron ore||1|
|8||Parking lot, Toll Plaza, Mining & Quarrying||2|
|9||Sale of Motor Vehicle Value exceeding Rs. 10 Lacs||1|
Purpose of this section:
Buyer: Buyer refers to a person who obtains in any kind of sale, by way of auction, tender or any other mode.
Seller: Seller refers the Central Government, a State Government or any local authority or corporation or authority whose total sales, gross receipts, or turnover from the business or profession carried on by him exceeds by Rs.1 crore in case of business and Rs.50 lakhs in case of profession established by under a Central, State or Provincial Act, and also includes an individual or a Hindu undivided family during the financial year immediately preceding the financial year
scrap means wastage obtained from the manufacture or mechanical working of materials that cannot be used because of its breakage, cutting up, wear, and other reasons.
FAQ’s Related to TCS under section 206C(1H):
Does this section apply to the Supply of Services?
Ans. No, the provision of the said sub-section is applicable only on the sale of goods of the value exceeding fifty lakh rupees and Supply of Services has been kept out of the purview of this sub-section. Therefore, the provision is not applicable to the consideration received in relation to the supply of Services.
Q. Is there any grant of relaxation in the ambit of a pandemic?
Ans. Yes, due to the outbreak of a pandemic, the Ministry of Finance has granted a 25 percent discount on the respective rate of tax collected at source till 31st March 2021. The rate of tax under sub-section (1H) is 0.1 percent, after the discount, the effective rate of tax becomes 0.075 percent. The TCS is to be deposited on the receipt of payment and the due date of deposit continues to be the 7th of the following month. In case the buyer does not have a Permanent Account Number or Aadhaar number, then the rate of tax amounts to 1 percent without any relaxation.
Q. Does TCS should be charged in the invoice bill?
Ans. The law does not specifically mandate the charge of TCS in the invoice bill. It totally depends on the choice of the seller whether to charge or not.
Q. Whether adjustments regarding Sales return, a discount is required to be made in bill issued with respect to TCS?
Ans. If the seller charges in the bill issued with respect to TCS then the amount is to be charged on the whole consideration received by the seller or the adjustment is required to be made for sales return, discount excluding GST for the purpose of collection of tax under sub-section (1H). It is further clarified in the circular that no adjustment is required to be made since the collection is with reference to the amount of sale consideration.
Q. Does the provision applicable to the advance received in respect of the goods?
Ans. Yes, Any amount received in advance on or after 1st October 2020 in relation to the sale of goods then the said provisions will be applicable to such advances.
Provided that if the advance amount is received before 1st October 2020 and the supply is made on or after the above-mentioned date then the provisions of TCS is not applicable on the same.
Non Applicability of Sub-Section (1H) of Section 206C
If the amount has been received in connection with the following sale of goods then the provision shall not apply to-
1. Any goods being exported out of India;
2. Any goods imported into India;
3. All the goods covered under the Table above. These goods are already governed by the existing provisions of TCS.
4. Any person, which the government notifies as and when required, who is to be excluded from the definition of the buyer for the purpose of this section.
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