Finance Act, 2020 has introduced a new provision under Section 206C(1H) related to Tax Collected at source (TCS) on Sale of Goods, Section 206C(1G)(a) for TCS on Foreign remittances through liberalized remittance scheme and 206C(1G)(b) on selling of overseas tour package w.e.f. 1st October, 2020.

Section 206C(1H) TCS on Sale of Goods

As per new provisions if Seller of any goods whose turnover in the preceding financial year exceeds Rs.10 crore then he shall be liable to collect TCS @ 0.1% (rate will be 0.075% till 31st March, 2021) from 1st October, 2020 of the sales consideration from the buyer if buyer purchases goods for the amount exceeding Rs.50 lakhs (This limit is applicable separately for each buyer). This Provision is not applicable for sales consideration received up to 30th September, 2020.

Some Key Terms used in the provision

1. Seller- Seller means a person whose turnover of goods or gross receipts from the business carried on by him exceeds Rs.10 crores during the financial year immediately preceding the FY in which the sale of goods is applied. Here, sale of services are not covered. Seller not include a person, central government by notification in the official gazette, specify for this purpose.
2. Buyer- Any person who purchases goods but does not include-
   1. The Central Government, State Government, High Commission, an Embassy, legation, commission, consulate, and trade representative of a foreign state or,
   2. A local authority as defined in explanation to clause(20) of section 10 or,
   3. A person importing goods into India or any other person as may be prescribed by the Central Government in the notification in the Official Gazette of India.
3. Goods- Goods have not been defined in the Income Tax Act, 1961, so we can refer other acts like Sale of Goods Act, 1930 and Goods and Service Act, 2017, in both the acts, Goods means any kind of movable property other than money and securities but includes actionable claims, growing crops and grass or things attached to or forming part of land which are agreed to serve before supply or under contract of supply.

Some Exceptions to this provision

1. If the Goods are exported out of India
2. If goods are already liable to deduct TDS by the buyer (e.g. Job Work, Composite supply etc.)
3. If the Seller is liable to collect TCS under other clause of section 206C (For e.g. In case of sale of motor vehicle, he shall liable to collect TCS if the value of motor vehicles exceeds Rs.10 lakhs)

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Section 206C(1G)(a)-TCS on Foreign Remittances through Liberalized Remittance Scheme

As per the RBI regulations, under Liberalized Remittance Scheme, Any resident individual can remit freely upto $250000 during the financial year for any permissible current and capital account transactions. Person is still eligible to use this limit. However, TCS shall be applicable to beyond a certain limit of remittances.

An authorized dealer receiving an amount or aggregate amount of Rs. 7 lakhs or more in the financial year for the remittances out of India under the liberalized remittance scheme of RBI shall be liable to collect TCS from a buyer remitting such amount out of India at the rate of 5%. In case PAN/ Aadhaar are not available, the rate will be 10% instead of 5%.

This provision is not applicable to following persons as given below:-

1. If the buyer is Central Government, State Government, High Commission, an Embassy, legation, commission, consulate, and trade representative of a foreign state or,
2. If the buyer is liable to deduct TDS under any other provisions of the act.

Section 206C (1G)(b) - TCS on Selling of Overseas Tour Package

The Seller of Overseas Tour Package is liable to collect on receiving the amount from any buyer, being a person who purchases overseas tour packages, at the rate of 5%.

There is no monetary limit specified for this transaction, for any amount, TCS shall be collected by the Seller of that package.

This section is not applicable to following persons as given below:-

1. If the buyer is Central Government, State Government, High Commission, an Embassy, legation, commission, consulate, and trade representative of a foreign state or,
2. If the buyer is liable to deduct TDS under any other provisions of the act.

Conclusion

These amendments in the provision of section 206C, widening the scope of TCS to include the foreign remittances, sale of overseas tour packages and sale of goods. The taxpayers will be required to make necessary changes in the invoice or receipt vouchers to facilitate the TCS collection. Changes in the ERP/ Operating software required may also be considered to keep a check on threshold/receipt etc.

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