Issues in TCS of 206(1H)
Issues in TCS of 206C (1H) by Sunil Arora & Associates
New provision w.r.t Collection of Tax at source u/s 206C(1H) has come into effect from 01\10\2020. Few points w.r.t the same are briefly summarized here under.
- The provision is applicable to every seller of goods who had turnover exceeding Rs 10 cr. for the F.Y ended 31\03\2020.
- Tax @ 0.1% is to be collected from the buyer of the goods where in aggregate of receipt of consideration from the buyer is more than Rs.50 lacs in any previous years. Rate of Tax for F.Y. 2020 - 21 is 0.075%.
- The provision is not applicable in case of export of goods, sale to Central/ State government/Local authority/embassy/High Commission etc. It also does not apply to sale of scrap, minerals, timber, liquor, etc. which are already covered by TCS u/s 206C (1).
- For the purpose of F.Y. 2020 -21: Receipts during the period 01\04\2020 to 30\09\2020 from a buyer are to be included for calculating the threshold limit of Rs. 50 lacs.
- Instead of getting into any controversies or legal interpretations, it makes more sense to collect tax @ 0.075% w.e.f 01\10\2020 on all receipts exceeding Rs. 50 lacs irrespective of the date of sale of goods.
- The aforesaid conservative approach is advisable as :
- The rate of TCS is miniscule.
- The buyer gets credit for the TCS.
- Unnecessary litigation with the department can be avoided.
- TCS has to be collected on the gross amount including GST.
- TCS need not be charged on the invoices. A system of debit note exclusively for TCS u/s 206C(1H) needs to be developed to record & comply with the said provisions.
- The provisions seems to defy all logic and purpose as accounting/collection/depositing/taking credit/reconciliation etc is going to be a nightmare for the business. A step definitely not for ease of doing business in the country.
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