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In our previous article, we have discussed the overview of the new provisions of TCS added by the Finance Act, 2020 on sale of goods, foreign remittances under liberalized scheme and selling of foreign tour packages. In this article, we are discussing the provision on sale of goods in a simple way to easily understand the new provision.
This provision came into effect from October 1,2020 and according to it, Seller whose turnover exceeds Rs.10 crores in the preceding financial year, will have to collect and deposit the TCS on receipt of sale consideration more than Rs.50 lakhs from the buyer (limit applicable for each buyer separately) in the current financial year. The rate of TCS will be 0.1% (presently 0.075% till 31st March, 2021).
TCS will not have to be collected if turnover does not exceed Rs.10 crores in the year ended 31st march, 2020. In other words, TCS will be applicable only if turnover of the seller exceeds Rs.10cr otherwise not. TCS will not be collected by the seller before October 1, 2020
TCS will be collected by the seller on receipt basis, for example seller made a sale of Rs.5 crores from 1st April to 30th September, 2020 to one buyer out of which Rs.1 crores was received on or after 1st October, 2020 even then seller have to collect TCS on Rs.1 crores though no supply made on or after 1st October, 2020 because it is tax based on receipt basis.
This provision has come up with many new questions and doubts which need to be resolved. Thus, Webtel Experts have addressed all these queries in their recently published videos.
For better understanding of this provision, let’s understand with an example as follows-
Turnover FY 2019-20
Turnover FY 2020-21
Aggregate Consideration upto 30th Sept, 2020
Aggregate Consideration after 30th Sept, 2020
TCS u/s 206C
0.1% on 30 lacs (being excess of 50 lacs)
Since turnover does not exceeds 10 crores
On 65 lacs being consideration received after 30th September
Since buyer is Central Govt., sec 206C(1H) not apply
X - Job worker
Y (TDS deducted u/s 194C)
Since TDS already deducted on the transaction
This new addition in the TCS provisions will result in additional compliances for the seller but brings more transparency in the transaction. Since this is a new provision, it needs more clarifications on some aspects of the section. Also it is a tax based on receipt basis which results in mismatch of information from buyer and seller’s point of view.
To know more about TCS/TDS updates, or TDS Software or TCS Software, drop an email to email@example.com