16 Nov 2020

Background & Coverage of TCS on Sale of Goods
Tax Collection at Source (TCS) - Sale of Goods
Yes, it is going to be a reality from October 1, 2020 and hence this update would be of prime importance to
you. Finance Act, 2020 has inserted clause (1H) in section 206C of the Income-tax Act, 1961 (“the Act”)
expanding the scope of TCS provisions, whereby a seller of goods is now required to collect tax at source @
0.1% from a buyer of goods on receipt of consideration for sale of goods.
“To widen and deepen the tax net”- is conveyed as the objective by the government for introduction of this
provision. Considering that we already have GST on sale of goods (if not exempted) and CBDT has data sharing
facility with GST department, how this objective would be achieved will remain a mystery considering that the
threshold for TCS on sale of goods is Rs. 50 lakh, which in any case would capture taxpayers who otherwise
undertake GST compliances.
How would the new provision work?
A seller of goods worth of Rs.1,00,000 will collect tax of Rs.100 in addition to sales consideration from a buyer.
Such seller will deposit sum of Rs.100 with tax authority in the name of buyer and will issue certificate thereof
to buyer. Based upon such certificate, such buyer will claim credit of TCS while filing his tax return. Now, such
buyer needs to take care to compute advance tax liability after considering credit of TCS.
Since such provision, which though does not cost you but may block the working capital, has now been made
a part of law, one needs to adhere to it unless one wishes to take a bold step of challenging the constitutional
validity thereof.
Considering the applicability of such provision on transaction being sale of goods, it has vast implications on
day to day business transactions and will increase the tax compliance and accounting burden. One may need
to change or alter the accounting software to incorporate necessary changes for complying with such provision
and its proper monitoring for tax and reporting purposes. Hence, it is necessary to understand the provision,
its applicability and coverage, and its implications on various practical business transactions.
Tags
# tcs
# TCS billing
# TCS on Sale of Goods
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TCS on Sale of Goods - FAQs - Series 1
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Divyesh GohelNov 25, 2020TCS on Sale of Goods - FAQs - Series 1
Divyesh GohelNov 17, 2020Background & Coverage of TCS on Sale of Goods
Divyesh GohelNov 16, 2020
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TCS on Sale of Goods
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