Tax collection at source on sale of goods w.e.f Oct 1, 2020
The Finance Act, 2020 has made an amendment by insertion of sub-section (1H) in section 206C of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) which is effective from 01.10.2020. As a result of the said amendment, a seller who receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding Rs. 50 Lakh in any previous year shall at the time of receipt of such amount collect from the buyer, a sum equal to 0.10% (0.075% up to 31.03.2021) of the sale consideration exceeding fifty lakhs as income tax.
Salient features of section 206C(1H)
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A seller of goods is liable to collect TCS at a rate of 0.1 per cent (0.075% up to 31.03.2021) on consideration received from a buyer in a previous year in excess of fifty lakh rupees. In non-PAN/ Aadhaar cases, the rate shall be one per cent.
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Only those sellers whose total sales, gross receipts or turnover from the business carried on by it exceed ten crore rupees during the financial year immediately preceding the financial year, shall be liable to collect such TCS.
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Central Government may notify person, subject to conditions contained in such notification, who shall not be liable to collect such TCS.
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No TCS is to be collected from the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to conditions as prescribed in such notification.
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No TCS is to be collected from the importer of any goods into India.
Who shall collect tax under section 206C (1H)
Every seller of goods is liable to collect tax from the buyer under this provision in the following circumstances-
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1. The term ‘seller’ is defined in the provision itself to mean any person. Thus an individual, firm, HUF, company, trust, AoP, BoI, society, - all are covered, who sells goods to buyers whether in wholesale or retail.
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Only sellers of goods are covered by this provision. Services are not covered. If a person sells goods as well as render services, then tax shall be collected only on the sale of goods. No tax shall be collected on the sale of services. If the seller is a registered supplier under GST laws, GST will be charged on both the invoices for sale and services.
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The seller must be a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs. 10 crore during the financial year immediately preceding the financial year in which the sale of goods is carried out.
All the sellers are not covered under this provision. Only those sellers of goods whose turnover or gross receipts in the preceding financial year exceeds Rs. 10 crore are only liable to collect tax under this provision.
In computing the threshold limit of Rs. 10 crore, the sale of goods, as well as sale of services, will be counted and added.
Further, in computing the total sales/turnover/gross receipts, the amount of GST shall be included. This is by virtue of the specific provisions of section 145A.