TCS on Sale of Goods - FAQs - Series 1

1. When does section 206C(1H) come into effect?

The provision is applicable with effect from October 01, 2020.

2. Who is required to collect tax at source on sale of goods?

Every person, being a seller of goods, is required to collect tax at source from the buyer in a financial year if total sales, turnover or gross receipts from the business carried on by such seller in the immediately preceding financial year is more than Rs. 10 Crore. In case of any doubt regarding calculation of the value of sales, turnover or gross receipts, one can resort to Guidance Note of ICAI on Tax Audit in view of identical language appearing in section 44AB(a).  

3. From whom is tax required to be collected at source?

Tax is required to be collected from a “buyer” of goods in a financial year when the total consideration (excluding the consideration for goods exported outside India) received during such financial year from such buyer exceeds Rs. 50 lakh.  

4. What is the applicable rate of TCS?

Tax is required to be collected at source @ 0.1%. However, if the buyer of goods does not provide Permanent Account Number  

(PAN) / Aadhar Number, tax is required to be collected @ 1%. It is to be noted that in respect of financial year (FY) 2020-2021,  

as per CBDT press release dated May 13, 2020, TCS shall be collected at 0.075%. Further, such reduction may not be applicable in case buyer does not furnish PAN / Aadhar Number and in such a case, tax would have to be collected at 1%. 

5. At what point in time is tax required to be collected at source?

Tax is required to be collected at the time of receipt of consideration.

6. On what amount is tax required to be collected at source?

Tax is required to be collected on the amount of consideration exceeding Rs.50 Lakh. 

7. When is TCS to be deposited with Government?

As per Rule 37CA, TCS is required to be deposited within 7 days from the end of the month in which tax is collected at source. 

8. Which type of transactions do not attract TCS provisions?

TCS provisions are not applicable to following transactions:

▪ Export (where goods are exported out of India)

▪ Import (where goods are imported into India)

▪ Sale of goods where the buyer is liable to deduct tax (TDS) under any provision of the Act and has also deducted such 

tax at source [e.g.in case of contract manufacturing, if buyer of goods is liable to deduct tax at source u/s.194C and has 

deducted the same at source]

▪ Sale of goods when such goods are subjected to TCS under any provision of section 206C other than section 206C(1H) 

[e.g. Sale of Scrap which is liable to TCS u/s.206C(1)]

▪ If a buyer of goods is Central Government or State Government or an Embassy, High Commission, Legation,  

Commission, Consulate and Trade representation of foreign state or local authority as referred to in section 10(20) of the Act 

▪ Any other person as the Central Government may notify (no such notification has been issued as on date). 

9. What are the compliances to be undertaken by seller?

A seller is required to undertake the following compliances:

▪ Filing of Quarterly TCS returns in form No.27EQ

Quarter ended -> To be Filed by

June                      15th July

September            15th October

December             15th January

March                    15th May

▪ Issuance of TCS certificate

Certificate of TCS is required to be issued by seller to a buyer in Form No.27D within 15 days from the due date of filing TCS return as mentioned above.

10. Whether a seller is required to report the transactions of sale of goods that do not attract TCS, in the TCS returns?

A seller is required to report following transactions even if the same

do not attract TCS:

▪ Non collection of tax at source by a seller where a buyer of goods has deducted tax under any other applicable provision of  

the Act

▪ If a buyer of goods is Central Government or State Government

or an Embassy, High Commission, Legation, Commission, Consulate and Trade representation of foreign state or local authority as defined as referred in section 10(20) of the Act or any other any other person as specified by the Central Government.