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Thursday, 22 October 2020

TCS on Sale of Goods from 01 October, 2020

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If your total sales in the previous year (viz., FY 2019-20) is exceeding Rs.10 Crores then you are liable to collect TCS as per the provisions of Section 206C(1H) from 01 Oct, 2020.

 Points to be noted while collecting TCS are as follows:

 a)     TCS needs to be collected, in addition to the invoice value, from customers from whom                         receipts during the FY 2020-21exceeds Rs.50,00,000/- the against the sale of goods (Note                 that receipts could be in respect of sale not only made during FY 2020-21 but also related to             an earlier year as well);

 b)     Only applicable for receipts from the sale of goods (sale of services not to be considered);

 c)     TCS is not applicable to receipts on account of export sales;

 d)    Needs to be collected at the time of receipt of consideration;

 e)     Seller has to collect 0.075% (up to 31stMarch, 2021) and 0.1% (from 1st April, 2021) as TCS;

 f)      If the buyer does not furnish PAN/Aadhaar then the rate of TCS would be 1% instead of                     0.075%/0.1%;

 Details of Tax Collection needs to be submitted quarterly in Form 27EQ;

 g)     If the buyer has already deducted or is already required to do TDS on the seller in respect of             the sale then TCS is not required to be collected by the seller on such sales;

Note: Details of the such buyers from whom TCS is not collected since TDS has been deducted by such buyer/s needs to also be reported in the Form 27EQ;

 h)    TCS needs to be collected on the total amount of receipt, that is, Invoice Value  (including GST                 component);

 i)      TCS needs to be collected on the amounts received exceeding Rs.50,00,000/-;

 a.     The limit of Rs.50 lakhs needs to be considered for the whole of the financial year.

b.     If aggregate receipts from a customer has already exceeded Rs.50 Lakhs as at                               30th September, 2020, then TCS is applicable on every receipt from 1st of October, 2020.
c.     If aggregate receipts from a customer has not exceeded Rs.50 Lakhs as at                                      30th September, 2020, then TCS is applicable only after the aggregate receipts exceed               Rs. 50 Lakhs and only on the amount exceeding Rs. 50 Lakhs.


j)      TCS on Advances:

 a.     Advance received on/before 30th September 2020 and sale invoice raised on/after 1st October, 2020 as per the circular issued by the IT Department, TCS is applicable at the time of receipt. Since, advances are received prior to 1st Oct, 2020 TCS is not required to be collected.

b.     Advance Received from 1st of October, 2020, TCS is required to be collected for all the advances received from 1stOct, 2020 subject to threshold of Rs.50,00,000/-;

 k)     TCS needs to be done even if the amount receivable is adjusted against another payable or against anybody else’s account.

 l)      The system of recording and accounting sale data - party wise and PAN wise needs to  be introduced so as to be able to seamlessly get information to check the applicability or otherwise of this TCS.

 m)   Sales to multiple enterprises operated under 1 (one) PAN, generally occurring in the proprietary business scenario would have to be tracked based on PAN as well.

 n)    The new accounting system shall have focus & generate reports for the following scenarios

a.     Cases where sale value per PAN has exceeded the limit on Rs.50 lakhs as on 30th September, 2020;

b.     Cases where sale value per PAN has exceeded the limit on Rs.50 lakhs as on a particular transaction date from 1st October, 2020;

c.     Cases where advance is received at any time during the year, in respect of a customer to whom the sale made is in excess of Rs.50Lakhs and sale invoice in respect of such advance is raised after 1st October, 2020;

 We have visualized only certain scenarios that would have the applicability of TCS under Section 206C (1H). Any scenario that is unique to your business needs to be specifically addressed. Further, this is a new provision, and a lot of clarity is expected to be given by the ministry of finance or the CBDT in this regard. Our views are as per provisions as is applicable as of today.

For you to remain compliant with the provisions, so as to not attract penal provisions, you may have to change the accounting system and method for compiling the data on sales and collection of tax at source.


You may get in touch with us at RAONV2K@YAHOO.CO.IN (Cell: +91 9849025383) for any support that you require in either setting it up or reviewing the process set up by you for capturing the data in this regard.

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