Q1. What is the applicability of these new provisions or who is required to comply with these provisions?
A: Every seller whose total sales, gross receipts or turnover from his business exceeds INR 10 crores in the immediately preceding Financial Year is liable to collect TCS. Therefore if the turnover of the seller in FY 2019-20 exceeds INR 10 crores, these TCS provisions become applicable.
Q2. When is TCS required to be collected or what is the scope of these provisions?
A: Seller who receives any amount as consideration for sale of any goods exceeding INR 50 lakhs in a financial year from a buyer, at the time of receipt of such amount is required to collect tax at source (TCS) on the sale consideration exceeding INR 50 lakhs. The collection is required to be made at the time of receipt of the amount of sales consideration.
Q3. Since TCS provisions come into existence in the middle of the financial year, how will limit of INR 50 lakhs be calculated?
A: Since the threshold of fifty lakh rupees is with respect to the previous year, calculation of receipt of sale consideration for triggering TCS under sub-section (1 H) of section 206C shall be computed from 1st April, 2020. Hence, if a person being seller has already received fifty lakh rupees or more up to 30th September 2020 from a buyer, the TCS shall apply on all receipt of sale consideration during the previous year, on or after 1st October 2020, from such buyer.
It is clarified that the provision of this sub-section shall not apply on any sale consideration received before 1st October 2020. Consequently it would apply on all sales consideration (including advance received for sale) received on or after 1st October 2020 even if the sale was carried out before 1st October 2020.
Q4. What is the rate of TCS under these new provisions?
A: The rate of TCS is 0.10% in all cases where the PAN of the buyer is available. If the buyer fails to provide PAN/Aadhar, TCS shall be collected at the rate of 1 per cent.
Government of India vide press release dated 13 May 2020 has announced reduction in TCS rates by 25 per cent of the existing rates. Such new reduced rates are applicable till 31 March 2021. Accordingly, a lower rate of TCS at the rate of 0.075 per cent shall be applied instead of 0.1 per cent till 31 March 2021.
Q5. What are the specific exclusions in the law on which these provisions are not applicable?
A: TCS on sale of goods under section 206(1H) shall not apply :-
-where buyer is required to withhold taxes and such buyer has done withholding of required amount.
-on export of goods;
-on goods that are specifically covered under sub-section (1), (1F) or (1G) of section 206, i.e.: Alcoholic liquor for human consumption, Tendu leaves, Timber or any other forest produce, Scrap, Minerals, being coal, or lignite or iron ore, Motor Vehicle, Overseas tour package.
-when sale is made to Central/State Government or Embassy/High Commission, Consulate or Trade Representative/Local Authority.
Q6. Whether adjustment is required to be made for sales return, discount or indirect taxes including GST for the purpose of collection of tax under sub-section (lH) of section 206C of the Act?
A: It is hereby clarified that no adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under sub-section (IH) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration.
Q7. What is the due date for payment of the TCS so collected?
A: The due date for payment of the TCS so collected is 7th of the following month for each month