Tax Collection at Source on sale of goods with effect from October 1, 2020
The Finance Act, 2020 widen the scope of Tax Collected at Source (TCS) by introducing Section 206C(1H) of the Income Tax Act, 1961 (ITA), which provides for TCS on sale of goods exceeding INR 5 Million to a buyer in a financial year by the seller . The relevant extract of Section 206C(1H) of the ITA is reproduced as follows:
“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 percent 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 Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words “five percent”, the words “one percent” had been substituted.”
As per the above provisions, if a seller makes the sale of goods whose value, individually or in aggregate for the previous year exceeds INR 5 Million, he shall collect TCS at the rate of 0.1% on the value of sale consideration if the buyer furnishes his Permanent Account Number (PAN) or AADHAR, whereas in case the buyer fails to furnish PAN or AADHAR, the TCS shall be collected at the rate of 1% of the value of consideration.
The relevant provisions of Section 206C(1H) of the ITA will not apply in the following circumstances:
Exceptions to Section 206C(1H)
- The above section will not apply where:
- Goods already covered under any other provision under Chapter XVII-BB of ITA,
- Export of goods,
- The values of goods or aggregate value of goods is less than equal to 50 Lakhs,
- Where buyer is Central government/ State Government/ Local Authority/ an Embassy/ High Commission/ Consulate & representative of foreign state, and
- A Person importing goods into India or any person notified by the central government.
Buyer – a person who purchases goods, but does not include Central government/ State Government/ Local Authority/ an Embassy/ High Commission/ Consulate & representative of a foreign state, importer of goods, or any other notified person.
Seller – a person whose total sales, gross receipts, or turnover from the business carried on by him exceed INR 100 million rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out.
Last Updated: 8th September 2020 This article is contributed by:
Lakshay Kumar Manager – Taxation Advisory & Compliance Services
Tag: Tax