With Regards to new Provision regarding TCS on sale of Goods wef 01.10.2020, we would like to state as under:-
Sub-section (1H) has been inserted in Section 206C by Finance Act, 2020 for collection of TCS by the seller on sale of any goods, wef 01.10.2020:-
1) A Seller of Goods is liable to collect TCS from Buyer on Sale of any goods;
2) Turnover of seller is more than INR 10 Crores in previous financial year;
3) TCS to be collected if the Value/Aggregate Value of Goods is more than ₹ 50 Lakhs in a financial year;
4) TCS to be collected on [ Total Sale Value – ₹ 50 Lakhs];
5) Rate of TCS is 0.1% (For F.Y. 2020-21 the rate is 0.075%), if PAN of buyer is available [ 1% if PAN not Available].6) The tax collected during the month needs to be deposited within seven days of next month. Please note that there is no exception or extended time for the deposit of tax collected in the month of March7) Filing of statement (Form no. 27EQ)– A quarterly statement of all the tax collected at source during the quarter needs to be submitted within 15 days fromthe close of quarter as mentioned in Table -1.8)Issuance of certificate (Form no 27D)– Certificate for tax collection needs to be issued to the buyer by the seller.
Illustration for your Understanding:-
1) Sales made to a buyer is less than ₹ 50 Lacs up to 30-09-2020 Sale
Sales upto 30-09-2020 Rs. 35 LakhsAmount Received upto 30-09-2020 Rs. 20 Lakhs Invoices raised from 01-10-2020 Rs. 30 lakhs
As TCS shall be applicable beyond receipts of ₹ 50 Lacs. Therefore, on the initial receipt of ₹ 25 Lacs after 01-10-2020, TCS shall not be applicable. Consequently, TCS shall be applicable as and when ₹ 15 Lacs [₹ 35 Lacs + ₹ 30 Lacs – ₹ 50 Lacs] shall be received.
2) Sales made to a buyer is more than ₹ 50 Lacs up to 30-09- 2020Sales upto 30-09-2020 Rs. 65 LakhsAmount Received upto 30-09-2020 Rs. 30 Lakhs Invoices raised from 01-10-2020 Rs. 20 lakhs
As TCS shall be applicable beyond receipts of ₹ 50 Lacs. Therefore, on the initial receipt of ₹ 20 Lacs after 01-10-2020, TCS shall not be applicable. Consequently, TCS shall be applicable as and when ₹ 35 Lacs [₹ 65 Lacs + ₹ 20 Lacs – ₹ 50 Lacs] shall be received.
3) Amount received from a buyer is more than ₹ 50 Lakh up to 30-09-2020Sales upto 30-09-2020 Rs. 65 LakhsAmount Received upto 30-09-2020 Rs. 55 Lakhs Invoices raised from 01-10-2020 Rs. 20 lakhs
As TCS u/s 206C(1H) shall be effective from 01-10-2020, therefore TCS cannot be charged on collections made prior to 01-10-2020. Therefore, in this case, TCS shall be charged on the receipt of amount on or after 01-10-2020 i.e. on ₹ 30 Lacs [₹ 65 Lacs +₹ 20 Lacs – ₹ 55 Lacs].
The above provisions of TCS will not apply, in following cases:-a) Sale of Goods to the Central Government, a State Government, an embassy, a High Commission,legation, commission, consulate and the trade representation of a foreign Stateb) Sale of goods to a local authority
c) Sale of goods to a person importing goods into India
d) Export of Goodse) Sale of Services
Note: How and when to charge TCS from the buyer?
Alternative 1- The TCS can be collected by charging through invoice
Alternative 2: The TCS can be collected by charging through debit note
How to get ready for Compliance:-
1) To identify the customers from whom receipts for consideration for sale of goods is more than ₹ 50 lacs during the year. For this, customers already breached the threshold or potential customer who may cross the threshold shall be identified.
2) You may insert a specific line item in invoice to charge TCS or it may chargeTCS through a debit note. Further, it has to be made sure that invoice or debit note format remains GST compliant.
3) The buyer shall be intimated in advance regarding levy of TCS provisions and obligation on him to pay for TCS.
4) Open a separate ledger account in books of account, to account for the TCS
receivable from customer and TCS payable to Govt. A separate ledger account will help in reporting and reconciliation.
5) Setup the checklist and procedure for compliance such as deposit of TCS, filing of statement and issuance of certificate to buyer.
Please Note: In absence of any clarification from the government as to whether TCS to be charged before GST or after GST, it is better to charge TCS on the total amount including GST until any such clarification is received.However, GST is not required to be charged on TCS.
Thank You !