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Income Tax

Widening the scope of TCS (Tax Collection at Source) from 1st Oct 2020

[By Jyotish M Shah, Partner]

Widening the scope of TCS (Tax Collection at Source) on foreign remittance, selling overseas tour package, and sale of goods over a prescribed limit from 1st October 2020.

Section 206C providing for TCS has been amended to widen the scope to cover:

  1. Authorised Dealer who receives Rs.7 Lacs or more from person for remittance out of India under liberalised remittance scheme (LRS) has to collect TCS @ 5% from him.
  2. Seller of an overseas tour program has to collect TCS @ 5% from the buyer of such package.
  3. A seller of goods (other than for export of goods) has to collect TCS @ 0.075% up to March 2021, and @ 0.1% thereafter on consideration received from the buyer in excess of Rs.50 Lacs.

If the buyer has not provided PAN/Aadhaar, the rate of TCS will be 10% for (1) & (2) above and 1% for (3) above.

Seller means a person whose total sales, gross receipts or turnover from the business exceeds Rs. 10 Crores during the financial year immediately preceding the financial year in which the sale of goods is made.

Exclusion: The above mentioned provision will not apply to a buyer:

  1. Who is liable to deduct tax at source under any other provision of the Income Tax Act and he has deducted such TDS
  2. Central Government, State Government, Local Authority, Embassy, etc.

Payment of Tax: Such tax collected at source is to be paid by the 7th of the succeeding month.

Return: Quarterly TCS report is to be filed in Form 27EQ within 15 days from the end of the quarter and by 15-May for the Jan-Mar quarter.

TCS Certificate: TCS Certificate must be issued to the buyer within 15 days of the due date of filing the TCS Return.

Issues:

  • Whether TCS is to be collected in the invoice to be raised or at the time of receipt of sale consideration?

Comment: Though the section uses the wordings receipt of consideration for sale of any goods, it will be practically difficult to raise demand against the buyer subsequently, if not raised in the invoice.

  • Whether TCS is to be paid within the prescribed time with reference to invoice for sale or same is to be paid with reference to receipt of sale consideration against the invoice?

Comment: Though the section uses the wordings receipt of consideration, for practical purposes payment of TCS should be made with reference to invoice.

  • Whether TCS is to be collected on total sale consideration or only on the amount in excess of Rs.50 lacs?

Comment: As per the language of the section TCS is to be collected and deposited only on the amount of sale consideration exceeding Rs.50 lacs and TCS is not to be collected and deposited upto sale consideration of Rs.50 lacs.

  • Whether sale for the full current financial year (2020-21) is to be considered or only the sales made after 01.10.2020 are to be considered?

Comment: Sale consideration for the full financial year is to be considered for deciding whether Buyer is covered for TCS or not. TCS, however, is to be collected and paid only on the sales made after 01.10.2020 to the extent same are in excess of Rs.50 lacs.

  • In order to decide liability of the seller to collect TCS qualifying turnover of Rs.10 crores is to be considered for current year or of the previous year?

Comment: As per the wordings of the section seller is liable to collect and deposit TCS during a financial year only if, his gross receipt or turnover of preceding financial year was in excess of Rs.10 crores.

  • Whether TCS is to be collected on advance against sale received from the buyer?

Comment: Since advance payment cannot be said to be consideration received against the sale, TCS need not be collected and deposited at the stage of receipt of advance payment.

  • Whether in case of an individual person having multiple proprietorship concerns sales made to all the concerns have to be clubbed for the purpose of determining the limit of Rs.50 lacs or each proprietorship concern can be considered separately?

Comment: Since, the person is the same and having one single PAN, sales made to all his proprietorship concerns have to be clubbed together for the purpose of determining the liability for collection and deposit of TCS.

  • Whether TCS is also to be collected on the amount of GST included in the invoice?

Comment: GST will also be part of sale consideration and therefore, TCS is to be collected on total amount of invoice including GST unless clarified otherwise by the department.

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