TCS UNDER SECTION 206C(1H) OF INCOME TAX ACT EFFECTIVE FROM 01.10.2020

 

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 sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year shall at the time of receipt of such amount collect from the buyer, a sum equal to 0.1 percent of the sale consideration exceeding fifty lakhs as income tax.

This provision is applicable only on those businesses whose turnover of Last F.Y. is more than Rs. 10Crs

If the buyer has not provided PAN or Aadhar, then TCS rate will be 1%.

Note : For F.Y. 2020-21 rate of TCS is 0.075%.

This provision is not applicable if the buyer is:

Ø     Central Government, state government, an embassy, a high commission, legation, commission, consulate and the trade representation of foreign state.

Ø      A local authority

Ø     A person importing goods into India

Ø     Who have deducted TDS under any other provision

We can understand this TCS provision with the help of an example: 

Sale Value of goods	GST @ 18%	Gross Invoice Value	Cumulative Gross Invoice Value	TCS threshold of INR 50 Lac	TCS Value
10,00,000	1,80,000	11,80,000	11,80,000	-	-
25,00,000	4,50,000	29,50,000	41,30,000	-	-
30,00,000	5,40,000	35,40,000	76,70,000	26,70,000	2,003
25,00,000	4,50,000	29,50,000	1,06,20,000	29,50,000	2,213
90,00,000	16,20,000	1,06,20,000		56,20,000	4,215

Effect of this amendment on business are as follows:

Ø    You need to collect TCS from customer and they will get credit in Form 26AS.

Ø    Supplier will collect TCS from you and you will get credit in Form 26AS.

Ø    Advance Tax computation will change for F.Y. 2020-21

Ø    Billing may change. ERP change may be required.

SOURCE : CBDT

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