An Overview of collected Taxes at source under section 206C

By | May 2, 2022

Information on – An Overview of collected Taxes at source under section 206C

There are on the brink of 32 items of income/payments on that tax are deductible at supply (TDS) and eleven things on that tax have got to be Tax collected at supply (TCS). but this position has currently been modified when the introduction of the recent subsection (1H) in Section 206C of the Finance  Act vide Finance Act, 2020 has got a result from 01.10.2020.

The new provision stipulates that every one merchandise that wasn’t coated by any clause of erstwhile Section 206 shall currently be subject to aggregation at supply and consequently prescribed sellers have got to collect tax from the purchasers on all merchandise w.e.f 01.10.2020 as per pertinence. The position of Section 206 when the modification is summarized as below:-

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Section 206 C:

Category A Sales TransactionsCategory B Grant of Lease/LicenseCategory C (Sale of following mentioned items where amount exceed a specified limit)    
Alchoholic Liquor for Human Consumption    Parking lotMotor Vehicle (Value exceeding Rs 10 Lacs)    
Tendu LeavesMining & quarrying a part from petroleum/mineral oil/natural gas                           –
Timber gained under foreign lease  
Any other forest produced  
Scrap  
Minerals including Coal, ignite, Iron  
Indian made foreign liquorToll PlazaOthers *(Value exceeding Rs 50 Lacs)    

*Sub section 1(h) of Section 206C is given here for better understanding:-

“One and all, being a trafficker, who receives any amount as thought available of any merchandise of worth the worth} or combination of such value surpassing 50 lakh rupees in any previous year, apart from {the merchandise the products} being exported out of India or goods lined in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such quantity, collect from the customer, a add up to zero.1 per cent (0.075% upto 31.03.2021) of the sale thought surpassing fifty lakh  rupees as income-tax:

Provided that if the customer has not provided the Permanent Account variety or the Aadhaar variety to the vendor, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be browse as if for the words “five per cent”, the words “one per cent” had been substituted:

Provided any that the provisions of this sub-section shall not apply, if the customer is susceptible to deduct tax at supply beneath the other provision of this Act on the products purchased by him from the vendor and has subtracted such quantity.”

Rationalization — For the needs of this sub-section —

(a) “buyer” suggests that someone United Nations agency purchases any merchandise, however doesn’t embrace,—

(A) The Central Government, a regime, an embassy, a embassy, legation, commission, diplomatic building and also the trade illustration of a far off State; or

(B) A neighborhood authority as outlined within the rationalization to clause (20) of section 10; or

(C) someone commerce merchandise into India or the other person because the Central Government could, by notification within the Official Gazette, specify for this purpose, subject to such conditions as is also such as therein;

(b) “seller” suggests that someone whose total sales, gross receipts or turnover from the business carried on by him exceed 10 crore rupees throughout the year in real time preceding the year during which the sale of products is administrated, not being someone because the Central Government could, by notification within the Official Gazette, specify for this purpose, subject to such conditions as is also such as in that.”

The key problems and queries concerning the newly inserted clause (1H) of Section 206C of the revenue enhancement Act are self-addressed by the CBDT by the approach of Circular 17 of 2020 dated 29.09.2020 and promulgation dated 30.09.2020 provides as below:-

Circular 17 of 2020 dated 29.09.2020

 1. This section won’t apply to dealing on securities and commodities that area unit listed through the recognized stock market or cleared and settled by recognized clearing companies as well as recognized stock exchanges or recognized clearing corporations situated in the International money Service center.

 2. Transactions in electricity, renewable energy certificates, and energy-saving certificates listed through power exchanges registered in accordance with regulation 21 of the CERC.

3. Since section 206C (1H) of the Act applies on receipt of sale thought the supply of this sub-section shall not apply on any sale thought received before01. 10.2020. Consequently, it might apply on all sale thought (including advance received for sale) received on or when 01.10.2020 even though the sale was administrated before 01.10.2020

 4. Threshold of Rs 50 Lacs is with relation to the previous year, calculation of receipt of sale thought for triggering TCS shall be computed from 01.04.2020. thence if trafficker already received Rs fifty Lacs or additional upto 3009.2020 from the customer, TCS shall apply on all receipt of sale thought throughout the previous year on or when 01.10.2020 from such customer.

5. Just in the case of automobiles, the pertinence of clause(1H) is subject to clause (1F) i.e. (i) Receipt of sale thought from a dealer (not a shopper) would be subject to TCS beneath section 206C(1H) (ii) just in case of consumer receipt of sale thought of automobile of Rs 10 Lacs or less would be lined under the  clause (1H) of Section 206C, if such receipt exceeds the edge limit of Rs fifty Lacs throughout the previous year.

6. No adjustment on account of sale returns, discounts, or indirect taxes as well as GST is needed to be created for an assortment of tax beneath subsection (1H) of section 206C of the Act since assortment is created with relation to the receipt of the quantity of sale thought.

Promulgation dated 30.09.2020

1. TCS shall be applicable solely on the quantity received on or when 01.10.2020. For example, If the total receipt from someone until 30.09.2020 is Rs. 1 Crore and when 01.10.2020 quantity received is Rs. 5 lacs from a similar person then TCS is to be collected solely on Rs. 5 lacs received when 01.10.2020 and not on Rs 55 Lacs (i.e Rs 1.05 Crores – Rs 50  Lacs (threshold) by as well as quantity received before 01.10.2020.

2. Just for the aim of calculating the threshold of Rs 50 Lacs the receipt from the start of the previous year i.e. 01.04.2020 shall be taken under consideration. For example, In higher than example trafficker is collection tax on Rs five Lacs when 01.10.2020 as a result of receipts from 01.04.2020 i.e. Rs 1.05 crores exceeded the threshold of Rs 50 Lacs


3. Taking under consideration the very fact that running account of consumers is unbroken while not one to at least one correlation of receipt with explicit sale invoice. The TCS shall be applicable on the quantity of all sales thought received on or when 01.10.2020 while not creating any adjustment of sales created before 01.10.2020


4. TCS isn’t an extra tax however it’s the nature of advance revenue enhancement/TDS that customer would get credit against its actual financial gain tax liability


5. TCS shall be applicable solely on receipt surpassing Rs 50 Lacs by a trafficker from a selected customer. For example,  On payment of Rs 1 Crore created by the customer to trafficker TCS are solely Rs 5000 i.e. 0.1% of (Rs 1 Crore minus Rs 50 Lacs)

6. TCS is applicable solely to those sellers having their business turnover exceed Rs 10 Crores throughout the immediately preceding year who are principal that assesse is already compliant with TDS/TCS demand.

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