TCS on Sale of Goods Sec 206C (1H) inserted by Finance Act 2020

TDS vs TCS

TDS is deducted from the payment made by buyer to seller
whereas
TCS is collected in payment received by seller from buyer

Applicability-

Any seller selling goods whose Gross sale / turnover / receipts exceeds INR 10 Crores in the preceding Financial Year
And
That seller has sold goods to a buyer in aggregate of more than INR 50 Lakhs after October 1st,2020
Then
Such seller, on further sale of goods to that particular buyer, shall at the time of receipt of the amount, collect TCS @0.1% which is in excess of INR 50 Lakhs.
Example: If a person has sold goods of INR 60 lakh to a particular buyer after October 1st, 2020, then TCS needs to be collected at 0.1% only on INR 10 lakh

Non Applicability-

If the goods sold is already covered under Section 206C(1) or 206C(1F) such as alcoholic liquor for human consumption, tendu leaves, timber, scrap, minerals, or any other forest produce not being tendu leaves or timber;
As per Sec. 206C(1F), every seller of Motor Vehicles, having value more than INR 10 Lakhs, shall collect TCS @ 1%;
If goods are exported from India to any country outside India i.e., Export of goods is out of purview
If buyer is Central Government, State Government, Embassy, Consulate, High Commission, local authorities or any other person as notified by Central Government in Official Gazette;
If buyer is liable to deduct TDS under any other section of the Income Tax Act, 1961;
TCS is not applicable on sale of properties as it is governed by sec. 194IA of Income Tax Act.

Collection-

Seller shall collect TCS @ 0.1% of the sales consideration at the time of receipt of such amount;Liability to collect TCS will arise even in case of Advance Payment received though the goods will be physically delivered little later

TCS to be collected on total sales invoice which includes GST as well.

Situation 1: Sale order is before 1st October 2020 but the sale is not completed as up to 30.09.2020. TCS would be applicable if any amount is received on or after 01.10.2020

Situation 2: TCS is not required to be collected on trade receivables of goods standing in books as on 30th September 2020

Notes-

Business which newly started in the FY 2020 – 21, provision of TCS is not applicable;TCS is to be collected at the time of collection of the amount and not at the time of raising sales invoice;
Sales made before October 1st, 2020, this section is not applicable
The law does not make it mandatory to comply continuously it means “The applicability of this section will fluctuate with the fluctuations in the turnover of the assesse in the preceding Financial year.”

Clarifications-

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 under sub-section (1 H) of section 206C shall apply on all receipt of sale consideration during the previous year, on or after 1sth October 2020, from such buyer.

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. 

TCS is also to be collected on sale of shares and securities of Unlisted Company including preference shares