TCS on Sale of Goods - FAQs - Series 2

11. Who is entitled to claim credit of TCS and in which year?

A buyer (from whose account tax has been collected at source) is entitled to claim credit of TCS. Such TCS credit shall be allowed in the financial year in which such tax collection has been made by the seller. Such amount of tax collected and deposited by the seller will be reflected in Form No.26AS of the buyer based on TCS return filed by the seller. The same can also be verified based on TCS certificate as received from seller.

12. Whether amount of TCS is required to be shown in the sales invoice or receipt advice?

There is no statutory requirement under the Act to disclose TCS amount either in invoice or in the receipt advice. However, since the seller is required to collect such tax from buyer, one may consider to intimate the same to the buyer either through invoice or through a debit note to demonstrate that the seller is collecting the tax at source from the buyer.

13. Whether a buyer of goods can apply for lower / non-collection certificate from tax authorities?

The provisions of section 206C(9) empowers

the assessing officer to grant certificate to the buyer for non-collection / collection at a rate lower than specified rate of TCS in respect of transactions covered by sub-section (1) or (1C) of section 206C of the Act. However, such provision is yet not made applicable to TCS on sale of goods under section 206C(1H). Hence, the buyer of goods would not be eligible for such benefit.

14. While computing the threshold of Rs. 50 Lakh for FY 2020-21, whether the consideration received from a buyer between April-September 2020 is to be included?  

Yes.

Though the TCS provision on sale of goods is operative with effect from October 01, 2020, the provision casts an obligation to collect tax at source when the total consideration received during the previous year exceeds by Rs. 50 Lakh. Accordingly, amount of consideration received during April 2020 to September 2020 is required to be included while computing the threshold of Rs. 50 Lakh. 

15. Whether the threshold of Rs. 50 Lakh is to be tested for all the buyers cumulatively or is it an individual limit applicable to each buyer?  

The threshold of Rs. 50 Lakh is applicable for each individual buyer.

16. I have newly set up my business in April 2020. Whether TCS will apply in my case if turnover during the current year is likely to exceed by Rs.10 Cr.?  

No.

TCS is applicable to a seller only if turnover or receipts from business in immediately preceding year has exceeded Rs. 10 Cr. In case of newly set up business in April 2020, the turnover or receipts in immediately preceding year is not available and hence should be considered as Nil. Hence, in such case, seller should not be required to collect TCS in FY 20-21.

17. Whether tax is to be collected in respect of consideration received on or after October 01, 2020 in respect of sale of goods made during April-September 2020? 

No

Considering that the TCS provisions are effective only from October 1, 2020, in our view, the provisions should apply only in respect of transaction of sale effected on or after October 1, 2020 and accordingly, since the sale was made prior to October 01, 2020, such amount should not be subject to TCS. However, such consideration is required to be included while computing the threshold of Rs. 50 Lakh for a buyer.

18. The seller has received an advance prior to October 01, 2020 and sales against the said advance will be recognized on or after October 01, 2020. Whether TCS is applicable on such sale? 

No.

TCS provision, which becomes effective from October 01, 2020 casts an obligation to collect tax at source at the time of receipt of consideration of sale of goods. Accordingly, in our view, since consideration for sale of goods has already been received prior to October 01, 2020, such amount should not be subject to TCS. However, such consideration is required to be included while computing the threshold of Rs. 50 Lakh for a buyer.

19. Whether TCS provisions apply on advance received on or after October 01, 2020 where no sale has been recognised during the financial year 2020-21 against such advance?

Yes.

Tax is required to be collected by a seller at the time of receipt of consideration for sale of goods. Since the seller has received the  

consideration for sale of goods on or after October 01, 2020 but prior to the sales event, in our view, to make such provision operative, it is advisable to collect tax at source on such advance received.

20. Whether TCS provisions apply to a seller exporting goods from outside India to a buyer in India? 

The person importing goods from outside India has been excluded from the definition of ‘buyer’ and therefore, such transaction should not be subjected to TCS.