SECTION 206C(1) : TCS ON SALE OF GOODS

SECTION 206C(1): TCS ON SALE OF GOODS

1.What do you mean by TCS?

TCS stands for Tax collected at Source. TCS is a kind of tax that is collected by the seller from the buyer on sale of certain type of goods if the amount exceeds a specified limit, so that it can be deposited to the government.

TCS is required to be collected at the source if the value of transaction exceeds a specified amount.

The purchaser can claim this tax collected by the seller while paying his income tax liability for the year, and if the TCS collected is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TCS was to reduce the Tax evasion by the person receiving the income.

Note: –

Seller– A seller who sells specific goods and is responsible for collection of tax from the purchaser.

Purchaser– A purchaser is the person who buys specific goods from seller is responsible for paying TCS amount to seller.

2. What is TCS under Section 206C(1) of Income Tax Act?

Section 206C(1) of Income Tax Act, 1961 mandates the collection of tax at source (TCS) on sale of goods.

3.When is TCS to be deducted under Section 206C(1)?

TCS requirement arises:

• Debiting the money payable by the buyer to their accounts in books.

• Upon receipt of such money from the buyer in any mode, whichever is earlier.

Few examples of date of deduction are: –

S.no	Date of Payment	Date of debiting the money payable by the buyer	Date of TCS deduction
1.	30/04/2024	30/04/2024	30/04/2024
2.	30/04/2024	01/05/2024	30/04/2024
3.	01/05/2024	30/04/2024	30/04/2024
4.	01/05/2026	30/04/2024	30/04/2024

4.Who is required to deducts TCS under Section 206C(1)?

Any person other than Individuals/ HUFs (Individuals/ HUFs are required to collect TCS if their turnover is more than Rs. 1 crore or gross receipts is more than Rs. 50 lakhs during the previous year) are required to collect TCS under Section 260C(1) on sale of various goods like:-

• Sales of Tendu leaves.

• Sale of timber & other forest products.

• Sale of Alcoholic liquor for human consumption.

• Sale of Scrap.

• Sale of Minerals being coal, lignite, iron ore.

Example: –

Mr. Kunal buys Liquor for human consumption for selling in the market from Mr. Yogendra for Rs. 10 lakhs on 31/07/2024, 25 lakhs on 30/11/2024, 35 lakhs on 31/01/2025, 40 lakhs on 31/03/2025. Discuss the TCS implications on such transactions?

As per Section 206C(1), when the buyer sells liquor used for human consumption then he has to collect TCS @ 1% on such transactions.

The TCS collection will be as follows: –

S.NO	DATE	TCS AMOUNT	TCS DEPOSIT DATE
1.	31/07/2024	10,000 (10,00,000 * 1%)	07/08/2024
2.	30/11/2024	25,000 (25,00,000 * 1%)	07/12/2024
3.	31/01/2025	35,000 (35,00,000 * 1%)	07/02/2025
4.	31/03/2025	40,000 (40,00,000 * 1%)	30/04/2025

5.Rate of TCS under Section 206C(1)?

The TCS rate under this Section is: –

Sl no.	Nature of transaction	TCS if pan is available	TCS if pan not available
1.	Sale of tendu leaves	5%	10%
2.	Sale of Timber & other forest products	. 2.5%	. 5%
3.	Sale of alcoholic liquor for human consumption	. 1%	. 5%
4.	Sale of scrap	1%	5%
5.	Sale of Mineral being coal, Lignite, Iron ore	. 1%	. 5%

6.Exemption under Section 206C(1)?

No TCS if: –

• The buyer buys such goods for his personal consumption.

• The buyer is Public Sector Company.

• The Buyer is Central Government, State Government, Embassy, High Commission, Consulate, Trade representative and clubs.

• If resident buyer furnishes a declaration to the seller that “goods” are to be utilized in manufacturing/ production of any article or for the purpose of generation of power.

• If the buyer T/o of the last year more than Rs. 10 crores then buyer is required to deduct TDS u/s 194Q.

7.Time limit for deposit of TCS under Section 206C(1)?

The due date for deposit of TCS is as below: –

Month	Due Date
April	On or before 7^th May.
May	On or before 7^th June.
June	On or before 7^th July.
July	On or before 7^th August.
August	On or before 7^th September.
September	On or before 7^th October.
October	On or before 7^th November.
November	On or before 7^th December.
December	On or before 7^th January.
January	On or before 7^th February.
February	On or before 7^th March.
March	On or before 30^th April.

8.What is the due date for filing of TCS return under Section 206C(1)?

TCS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates: –

Quarter	Period	Due date (TCS filing)
1^St quarter	April-June	15^TH July.
2^nd quarter	July-September	15^TH October.
3^rd quarter	October- December	15^TH January.
4^th quarter	January- March	15^TH May.

9.Type of TCS return & form to be issued?

TCS under this section has to filed quarterly through FORM 27EQ and the collector has to issue FORM 27D to the buyer within 15 days of filing of return.

10.Fees/ Penalties for Late/ Non- Filing of TCS u/s 206C(1)?

Following penalties/fees will be levied if there is delay in TCS deduction or delay in deposit of TCS or non-filing of quarterly return.

Particulars	Penalty
TCS not deducted on time.	1% per month or part of month.
TCS deducted but not deposited before due date	1.5% per month or part of month.
TCS return not file on or before due date	200 per day maximum till TCS amount.

11.FREQUENTLY ASKED QUESTIONS?

Q. What is the threshold limit for TCS under 206C(1)?

A. NO, there is no threshold under Section 206C(1).

Q. Is Section 206C(1) applicable when the payee is a non-resident?

A. YES, this section also applies when the buyer is non-recipient.

Q. Is TCS applicable on GST amount also?

A. NO, TCS u/s 206C(1) is not applicable on GST amount, TCS is applicable on net amount after deduction of all taxes.

Nayan Saluja & Company

SECTION 206C(1) : TCS ON SALE OF GOODS

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