What Is The New Provision In Section 206C(1H) of Income Tax?

Introduction 

In this article, we will study of the new TCS Provision on Sale Of Goods Under Section 206C(1H) Of Income Tax Act, 1961.

From October 1, 2020, our Government has introduced a new provision for collecting TCS for the sale of goods and depositing the same to the Government. These provisions are given in Section 206C (1H) of the Income Tax Act and here we are discussing this provision in a very simple language with some practical examples so that the Taxpayers can understand the New provisions and follow them easily since it is a new provision.

 The CBDT has also issued a circular No. 17 in this regard on 29 September 2020, which will also help in understanding this provision practically. Subsequently, a press release dated 30 September 2020 also came from CBDT which also help us in understanding this provision which is mentioned in section 206C(1H) of Income Tax Act, 1961.

What Is The New Provision In Section 206C(1H)?

Every person, being a seller, who receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section 1 or sub-section[1F] or sub-section [1G] shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income tax.

Provided that if the buyer has not provided the Permanent Account Number or the Adhar number to the seller, then the provisions of clause [ii] of the sub-section 1[] of section 206CC shall be read as if for the words “ five per cent “, the words “ one per cent “ had been substituted:

Provided further that the provisions of this subsection shall not apply if the buyer is liable to deduct tax at source under any other provisions of this Act on the goods purchased by him from the seller and has deducted such amount.

Explanation – For the purpose of this sub-section,-

[a] “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 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:

[b] “ seller “ means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out, not being a 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.

The new provisions of TCS have come into force with effect from 1 October 2020 and according to it if your turnover is more than 10 crores in the previous financial year i.e. the year ended 31 March 2020, then this year you will have to collect and deposit TCS on your receipts from the sale of goods from such buyers from whom you received more than Rs. 50 Lakhs as sale consideration during the current Financial year. The TCS is payable on the amount of receipt which is greater than 50 Lakhs and received after 1st. Oct. 2020. The rate of TCS is 0.1% and Presently due to corona Pandemic 25% discount has been given in this tax rate till 31 March 2021 and its effective rate is 0.075%If your sales are less than 10 crores in the year ended March 31, 2020, then you do not have to collect this TCS since these provisions are not applicable in such situation. Apart from this, if you receive payments above 50 lakhs in a full year but you have not received any payments on or after 1 October 2020, then you do not have to collect any TCS i.e. on payments received before 30 September 2020 no TCS is payable.

Payments received here refer only to payments received in connection with “sale” of goods. This is receipt based TCS hence even if you received payments in advance for the supply of Goods, the TCS provisions are applicable.