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TCS on Sale of Goods under Section 206C(1H) with FAQs

TCS on Sale of Goods under Section 206C(1H) with FAQs

The government has introduced a new section 206C(1H) through Finance Act 2020 to extend the TCS provisions to the seller of goods. As per this provision, a seller whose turnover is above Rs 10 crore is required to collect tax, when he receives more than Rs 50 lakh from one buyer during a financial year. It is to be noted that the TCS should be collected at the time of receipt of the amount.

FAQ> on TCS on Sale of Goods

  • What is Section 206C(1H) of the Income-tax Act?

​Section 206C(1H)​ of the Income-tax Act deals with collection of tax at source (TCS) from buyer on sale of goods if the aggregate value of such sale consideration received in any previous year exceeds Rs. 50 lakh.

  • Who is responsible for collecting tax under section 206C(1H)?

The tax shall be collected by the seller who receives any amount as consideration exceeding Rs. 50 lakh for the sale of any goods, only if his total sales, gross receipts, or turnover from the business exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which such goods are sold.

  • What is the rate at which tax is collectible under section 206C(1H)?

The tax shall be collected at the rate of 0.1%. This rate shall not be subject to any surcharge or Health & Education Cess.

  • What is the threshold limit for the collection of tax under section 206C(1H)?

Tax is required to be collected with the sale consideration received in excess of Rs. 50 lakhs during the year.

  • When is a tax required to be collected under section 206C(1H)?

Tax is required to be collected at the time of receipt of such sum from the buyer.

  • What is the consequence if the buyer does not furnish his PAN to the seller?

​As per s​ection 206CC, if the buyer does not furnish PAN to seller, tax shall be collected at a rate higher of the following:
• At twice the rate prescribed in Section 206C(1H) of the act, or
• 1%​

  • What will be the rate of TCS under section 206C(1H) if buyer is a non-filer of income-tax return?

​ As per section 206CCA, if the buyer has not furnished its return of income as per section 139(1)​ and the due date has expired, tax is required to be collected at a rate higher of the following:

• Twice the rate prescribed in the relevant provisions of the act, or
• 5%​​

  • What will be the rate of TCS if both Section 206CC and Section 206CCA are applicable?

​If the buyer has neither furnished his PAN to the seller nor furnished his return of income for the previous year whose due date as per section 139(1) has expired, the tax shall be collected at the rates specified under section 206CC or s​ection 206CCA, whichever is higher.

  • How to deal with a transaction which is covered both under section 194Q as well as section 206C(1H)?

​​If a transaction is subject to TDS under Section 194Q, the buyer shall have the first obligation to deduct the tax. If he does so, the seller will not have any obligation to collect the tax under Section 206C(1H)​.

  • How to deal with a transaction which is covered both under section 194-O as well as section 206C(1H)?

​If a transaction is covered both within the purview of Section 194-O as well as Section 206C(1H), tax is required to be deducted under Section 194-O. Once the e-commerce operator has deducted the tax on a transaction, the seller is not required to collect the tax under Section 206C(1H)​ on the same transaction.

  • Whether tax is collectible under section 206C(1H) if goods are exported out of India?

​No tax is to be collected under s​ection 206C(1H) in respect of goods that are exported out of India.

  • How to deal with a transaction which is covered both under section 194Q as well as section 206C(1H)?

​​If a transaction is subject to TDS under Section 194Q, the buyer shall have the first obligation to deduct the tax. If he does so, the seller will not have any obligation to collect the tax under Section 206C(1H)​.

  • Whether TCS provision of section 206C(1H) applies if buyer is a person whose income is exempted from income tax?

No tax is required to be collected where goods are sold to a buyer who as a person is exempt from income tax under the Income-tax Act or any other Act passed by the Parliament.

However, this exemption is not available if only part of the income of the buyer is exempt from tax.​

 

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