UNDERSTANDING KEY ISSUES OF TCS ON SALE OF GOODS - Section 206C(1H)

1. UNDERSTANDING KEY ISSUES
OF TCS ON SALE OF GOODS
- Section 206C(1H)
October 2020

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Understanding Key Issues of TCS on Sale of Goods-Section 206C(1H)
Sr. No. Query Clarification
1 Who is Liable?? Tax is required to be collected by a person carrying on business whose total sales, gross receipts or
turnover exceeds Rs. 10 crores in the financial year immediately preceding the financial year of
sale.
Key Point:
 Both Sale of Goods & Revenue from Services are included only for the purpose of
determining turnover.
2 From whom tax shall be
collected?
Tax is required to be collected from a buyer from whom Seller receives amount of consideration for
sale of goods exceeding Rs. 50 lakhs during any previous year.
Exceptions from TCS Applicability:
 Exports and Imports have been exempted from the applicability of this section.
 Central Government, State Government, Embassy, Local Authority, etc.
Key Points:
 Sec 206C (1H) is applicable only on sale of goods and thus not applicable on Service
Providers.
 Consideration includes advances received for the sale of Goods.
 No TCS liability if tax is deducted or collected under any other provision of Act.
3 When shall be TCS
collected?
Tax should be collected at the time of receipt of payment from the buyer, if the value of sale
consideration received during the year exceeds Rs. 50 lakhs.
Key Point:
 Amount received prior to 30.09.2020 would also be considered for threshold of Rs. 50 lakhs
although TCS would be collected only from the amount received after 01.10.2020.

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Sr. No. Query Clarification
4 How much TCS shall be
collected?
The tax shall be collected by the seller of goods at the rate of 0.1%* of the sale consideration
exceeding Rs. 50 lakhs if the buyer has furnished his PAN or Aadhaar, otherwise, the tax shall be
collected at the rate of 1%.
Key Points:
 TCS for the specified receipts have been reduced by 25% for the period from 14-05-2020 to
31-03-2021 vide The Taxation and Other Laws (Relaxation and Amendment of certain
provisions) Act, 2020. *Hence, the rate of TCS on sale of goods shall be 0.075% till 31-03-
2021.
 TCS is on receipt basis and receipt would be inclusive of GST and thus TCS is required to be
collected on the sale consideration inclusive of GST.
5 Should TCS Be Charged In
Tax lnvoice?
It is not mandatory in the law and it depends on choice of the seller. If it is collected and deposited
on receipt of payment then the requirement of law is complete and it is immaterial whether it is
charged in the Invoice or not.
But if you want to use invoice as a tool to inform the buyer that seller is under obligation to charge
TCS; then TCS may be charged in the invoice itself so that the buyer knows that he is within the
purview of this TCS and there will be no dispute at the time of payment when you ask your buyer to
pay TCS.
If you choose to charge TCS in your bill / invoice then you have to follow this System as given in this
illustration
DESCRIPTION AMOUNT
Value of Goods 60,00,000.00
Add: GST 10,80,000.00
Total 70,80,000.00
Add: TCS 0.075 % 5,310.00
Invoice Value 70,85,310.00

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Understanding the above through an
illustration for FY 2020-21
Particulars Illustration 1 Illustration 2 Illustration 3 Illustration 4
Turnover FY 2019-20 9 Crores 11 crores 11 crores 11 crores
Receipts upto 30.09.2020
(Including Advances)
60 lakhs 20 lakhs 60 lakhs 40 lakhs
Receipts from
01.10.2020 to 31.03.2021
(including Advances)
60 lakhs 20 lakhs 40 lakhs 70 lakhs
TCS Amount
NA
(Turnover is below
10 crores)
NIL
(receipts does not
exceed 50 lakhs during
the financial year)
3,000
(0.075% on Rs. 40 lakhs
received on or after
01.10.2010)
4,500
(0.075% on Rs. 60 lakhs*)
* 1.1 crores - 50 lakhs
threshold
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This document is subject to amendments and clarifications provided by the Regulatory Authorities from time-to-time. The information provided in this document is for information
purpose only and should not be construed as legal advice on any subject matter. The Company, its Directors or any of its employees expressly disclaims all liability in respect to actions
taken or not taken based on any or all the contents of this document.