TCS on Sales of Goods: Finance Act, 2020

Introduction:

Provisions related to collection of TCS on sale of goods exceeding Rs. 50 lakhs as introduced in Finance Act, 2020 is all set to be made applicable w.e.f. 01.10.2020.

Applicability:

The provisions of TCS shall be applicable in following scenarios:

  • There shall be the sale of goods exceeding Rs. 50 Lakhs with in India. This means provisions of this section shall not be applicable if there is export sale.
  • Turnover of the seller during FY 2019-20 or FY 2020-21 shall be greater than Rs. 10 crore or expected to be greater than Rs 10 crores respectively.
  • Consideration received from the buyer (in one transaction or aggregate) shall be greater than Rs. 50 lakhs.
  • The provisions of this section shall not be applicable in case the buyer is Central Government/State Government/Embassy/High Commission/ Legation/ Commission/ Consulate/ Trade representation of a foreign state/Local Authority/Importer/any other person as may be notified.
  • If the transaction is already been covered by TCS [under Section 206C(1), 206C(1F) and 206C(1G)] or TDS provisions from buyer’s end then provision of section 206C(1H), TCS on sale of goods shall not be applicable.

Applicable Rates:

Rates Applicability
0.075% From period 01.10.2020 to 31.03.2021
0.10% From 31.03.2021 onwards
1.00% If buyer does not have PAN

 Compliances to be Done:

  • Seller should have valid TAN for collecting TCS.
  • After collecting TCS seller is required to deposit TCS within 7 days from the end of month.
  • Once the provisions are applicable on any seller he is required to fill quarterly returns in Form 27EQ within below mentioned due dates.
  • The seller is required to Issue TCS certificate in Form 27D, within due dates as mentioned below.
Quarter Due Date for

filing Return

27EQ

Due Date for

issuance of TCS Certificate

in 27D

I 15th Jul 30th Jul
II 15th Oct 30th Oct
III 15th Jan 30th Jan
IV 15th May 30th May

 

  • The Seller is also required to file Annual Return in Form 27E by 30th June of the Following Year.
  • The TCS which is collected by seller is reflected in FORM-26AS of the respective Buyer.
  • Details of TCS collected will be required to be furnished under Clause 34 of Tax Audit Report.

Important points to be considered:

  • Company will start collecting TCS, at applicable rate, on all invoices raised towards sale of goods after it exceeds Rs. 50 Lakhs, irrespective of the actual turnover of the customer during FY 2020-21.
  • TCS will be collected on (gross value – discount + GST) i.e. on total invoice value (clarification awaited).
  • Post month end, no refund of the TCS can be made to a buyer. Even it is collected on higher amount, the same will be deposited with the Govt.
  • The buyer can claim credit for the TCS amount while depositing Advance Tax and/or determining the final tax liability.
  • Nil or lower tax collection certificate can be applied by buyer with income tax office and it should be addressed to seller.

-Harmeet Singh
Audit& Tax Associate
ShineWing India