TCS on cash sale of goods or services / TCS Tax
Finance Act, 2016 imposed TCS on cash sale of goods or services with effect from 1-6-2016.
Finance Act, 2016 imposed TCS on cash sale of goods or services with effect from 1-6-2016. Finance Act 2016 has made the following amendments in section 206C of the Act :
New Sub Section (1D) of Section 206C is as follow
Every person, being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery or any other goods (other than bullion or jewellery) or providing any service shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,—
(i) for bullion, exceeds two hundred thousand rupees; or
(ii) for jewellery, exceeds five hundred thousand rupees or
(iii) for any goods, other than those referred to in clauses (i) and (ii), or any service, exceeds two hundred thousand rupees
Provided that no tax shall be collected at source under this sub-section on any amount on which tax has been deducted by the payer under Chapter XVII-B
TCS – Amendment as per Finance Act 2017
Analysis of Provision of TCS on cash sale of goods or services : Conditions
- Sale of any goods or any services (other than bullion or jewellery)
- Consideration for goods or services exceeds Rs. 2,00,000 in a (single) bill
- Out of such consideration, any amount is received in cash
- The seller will collect tax at the rate of 1% of sale consideration
No. Tax collection at source will not be levied if the cash receipt does not exceed two lakh rupees even if the sale consideration exceeds two lakh rupees.
Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.4 lakhs has been received in cheque and Rs.1 lakh has been received in cash. As the cash receipt does not exceed Rs.2 lakh, no tax is required to be collected at source as per section 206C (1D) (CBDT Circular No 23/2016 Dated 24.06.2016)
Under section 206C (1D), the tax is required to be collected at source on cash component of the sales consideration and not on the whole of sales consideration.
Illustration: Goods worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.2 lakhs has been received in cheque and Rs.3 lakh has been received in cash. Tax is required to be collected under section 206C (1 D) only on cash receipt of Rs.3 lakhs and not on the whole of sales consideration of Rs.5 lakha (CBDT Circular No 23/2016 Dated 24.06.2016)
- The seller will collect tax at the rate if sale is made or service is rendered w.e.f 01.06.2016
- Tax will be collected at the time of receipt of any amount in cash.
- This Rule will be applicable irrespective of the fact whether the buyer is a manufacturer, trader or the purchase is for personal use. However, the purchaser can obtain a lower TCS certificate by submitting Form No. 13 to the Assessing Officer.
- The seller will not be obliged to collect the tax, if the buyer has deducted the tax at source from the payment.
- Seller/service provider is required to take PAN of the purchaser/recipient of service.The person raising bill shall ensure after verification that PAN has been correctly furnished and mentioned in the bill. If PAN is not available, a declaration in Form No. 60 should be taken from the purchaser/recipient of service.Such a person is required to retain Form No. 60 for a period of 6 years from the end of the financial year in which the transaction is undertaken.
- The seller will furnish certificate to the buyer stating that tax has been collected, and specifying the sum so collected, the rate at which the tax has been collected.
CBDT clarifications via FAQ’s on TCS on cash sale of goods or services
CBDT issued clarifications on FAQ’s relating to TCS on cash sale :-
1. TCS on sale of Motor Vehicle : CBDT clarify via FAQ (circular )
Why TCS on cash sale of goods or services ?
As per the Memorandum explaining provisions of the Finance Bill, 2016, clarifies as under:
“In order to reduce the quantum of cash transaction in sale of any goods and services and for curbing the flow of unaccounted money in the trading system and to bring high value transactions within the tax net, it is proposed to amend the aforesaid section to provide that the seller shall collect the tax at the rate of one per cent from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees and sale in cash of any goods (other than bullion and jewellery), or providing of any services (other than payments on which tax is deducted at source under Chapter XVII-B) exceeding two lakh rupees.”
Finance Minister, in his budget speech :
“149. I also propose to collect tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs. ten lakh and purchase of goods and services in cash exceeding Rs. two lakh. For compliant taxpayers with resources, this levy not only advances collection of tax when the expenditure is incurred, but it provides data to the tax authorities to identify the persons who incur such expenditure, but may be missing from the tax base.
TCS on cash sale of goods or services:When not applicable ?
1. New proviso to sub-section (1D)
The seller will not be obliged to collect the tax, if the buyer has deducted the tax at source from the payment. Thus Provider of a service may not be obliged to collect tax, if the recipient has deducted tax at source.
E.g If Mr A rendered the services to Mr B for Rs 300000 and Mr B Deducted TDS on Rs 300000 before making the payment to Mr A, then Mr A is not obliged to deduct TCS of Mr B
2.New Sub-section (1E)
Nothing contained in sub-section (1D) in relation to sale of any goods (other than bullion or jewellery) or providing any service shall apply to such class of buyers who fulfil such conditions, as may be prescribed
Definition of ‘seller’ for TCS on cash sale of goods or services :-
In terms of the amendment in the definition of ‘seller’, an individual or HUF who provides services exceeding the limit specified in section 44AB(a) and (b) in the previous year, will be considered as seller for the purpose of the section. Accordingly, the provision of the section will apply to such service provider.
New Explanation (c) of Section 206C is as follow
(c) “seller” means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society and also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which the goods of the nature specified in the Table in sub-section (1) or sub-section (1D) are sold or services referred to in sub-section (1D) are provided.
Definition of Buyer for TCS on cash sale of goods or services :-
As per Explanation (aa) of Section 206C
(aa) “buyer” with respect to—
(ii) sub-section (1D) or sub-section (1F) means a person who obtains in any sale, goods of the nature specified in the said sub-section;
Definition of ‘ jewellery ‘ for TCS on cash sale of goods or services :-
As per Explanation (ab) of Section 206C
“jewellery” shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2
Explanation to sub-clause (ii) of clause (14) of section 2 is as follow :-
Explanation 1.—For the purposes of this sub-clause , “jewellery” includes
(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel
(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel
Book on TDS (with Advance Tax and Refunds)
Deduction of Tax at Source with Advance Tax and Refunds as Amended by Finance Act 2016 (English) (Hardcover, Dr Vinod K Singhania)
Related Post on TCS and TDS
- TCS on Sale of motor Vehicle above Rs 10 Lakh w.e.f 01.06.2016
- e-TDS / TCS returns through e-filing portal https://incometaxindiaefiling.gov.in
- TCS Penalty as per Income tax Act
- TCS on Sale of Motor Vehicle above Rs 10 Lakh , Goods or Services in Cash above 2 Lakh
- Penalty deleted as the Assessee was not aware of TCS provisions
- TCS on sale of Imported Timber
- TCS Govt A/c : Revised time and mode of Payment
- TDS Rates and Limit revised w.e.f 01.06.2016
- TDS Statement Upload Online -Procedure
- TDS on Commission paid to agent for rendering services abroad
- No TDS on sum paid for services rendered outside india
- NO TDS on VSAT /lease line charges paid to NSE/BSE
- No tds on sale of agricultural land
- NO TDS on Service tax
- Not liable to Deduct TDS in case amendment with retrospective effect
- TDS can not be demanded from deductor if taxes paid by deductee : SC
- No TDS on leasehold rights payment for long period say 99 years
- Employer not liable to deduct TDS @ 20% for non furnishing of PAN by Employees
- No TDS on payment of transmission charges u/s 194J
- Payer not Liable to Deduct TDS if Payee income is exempt
- No TDS on Rent if declaration in 15G/15H w.e.f 01.06.2016
- No TDS on Service Tax Component of Rent
- No TDS on Provision of Interest u/s194A if provision reversed
- No TDs on interest on FDR made on direction of Courts :CBDT
- No TDS on Reimbursement Expenses if separate bills raised
- No TDS on Interest on FCCB issued to foreign investors and utilized for verseas business
- NO TDS liability under Section 195 if Book entry passed reversed Subsequently
- No TDS Under Secction 194LA as Land Acquired by Mutual negotiation and not compulsory acquisition
- No TDS under section 194LA if land owners surrendered their land to municipal corporation for under development right certificates scheme
- No TDS on Compensation paid to evacuate slum dwellers
- No TDS on purchase of negative rights of films
- Section 194I No TDS on Lease payment for allotment of plot for 80 years
- Purchase of software is not payment for royalty, not liable to TDS
- TDS on Purchase of Property : FAQ’s
- Assessee not to be called for TDS deducted but not Deposited by Deductor : CBDT
- Debenture Interest charged in Profit and Loss A/c but not paid would not attract TDS under Section 193
- Sum paid for internet connection not liable for TDS under section 194J
- Additional amount Paid to Purchaser on cancellation of Flat is not interest under section 2(28A) hence No TDS
- Period of default of TDS for Interest recovery is from date of deductibility till date of actual payment of tax
- CBDT clarify TDS issues on payments made by Television channels, Broadcasters and Newspapers
- TDS on Payment to Contractor : section 194C
- TDS Rates and Limit revised w.e.f 01.06.2016
- TDS on Payment to harvester / transporter of Sugarcane from Farmers field
- Payment to intermediaries for hiring of transport for carriage of goods is also liable for TDS u/s 194C
- Even in case of oral contract with transporters TDS is liable to be deducted u/s 194C
- Purchases made after payment of excise duty and availment of credit can not be held as job work, no TDS under section 194C
- TDS on Provision for Expenses
- Section 194C payments to newspaper publishers
- No TDS on Reimbursement Expenses if separate bills raised
- All About 26AS (TDS, Refund , AIR information )
- 40(a)(ia) TDS default based on opinion of CA was bona fide mistake , No Penalty
- section 40(a)(i) No TDS Disallowance if Expenses Capitalised
- section 40(a)(ia) Payer not liable for TDS default due to retrospective amendments
- 40(a)(ia) Disallowance for TDS default if books rejected by AO
- Apply for non deduction of TDS u/s 195 even if person was subjected to concealment penalty