New provision – TCS on Goods Sold (Tax On Purchase)

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The Finance Act,2020 has introduced a new provision for Tax Collection at Source (TCS) u/s. 206C(1H) of the Income tax act,1961.

This is w.e.f. 1st Oct 2020.

As per this provision, Tax has to be Collected at source (TCS) in respect of Sale of Goods @ 0.1% on the consideration received on sale of such Goods , in excess of Rs. 50 Lakhs.

Who is required to Collect this TCS ?

Sellers whose Total Sales, Gross receipts or Turnover from the business exceed Rs. 10 Crore during the preceding Financial year is liable to Collect TCS.

For Example during the year 2020-21, you need to collect TCS if your Total Sales, Gross Receipts or Turnover during the year 2019-20 exceeds Rs. 10 Crore

Is there any Exceptions for Sellers ?

Yes. If you are a person as notified by the Central Government in Gazette. You are not required to Collect tax at source.

Who is a buyer for this purpose?

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;

Is it applicable for both Goods & Services?

No. It is applicable only for sale of Goods. It is not applicable for Sale of Services.

Are there any transactions on which TCS is not required?

Seller is not required to Collect TCS under this section

  • 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. (Like in case of Motor Vehicle dealer he shall collect the TCS on the motor vehicles if the value of the vehicle exceeds Rs. 10 Lac)

What is the rate at which TCS to be Collected?

The TCS has to be collected @ 0.1%.

If the buyer does not provide PAN or Aadhaar, the TCS rate shall be 1%

When should this TCS be collected?

The TCS should be collected at the time of receipt of Payment.

Other Point to be noted In the First year of implementation of this new provision, the Sale made to buyers up to 30th September 2020 shall not be liable to collect the TCS.

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