TCS on Sale of Goods

Tax Collected at source (TCS) is Income Tax which is required to be collected by the seller (Collector) from the Buyer along with the Price of Goods and applicable taxes. Provisions relating to TCS has been enumerated in section 206C of the Income Tax Act, 1961.

The Finance Act, 2020 has made an amendment by insertion of sub-section (1H) in section 206C of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) which is effective from 01.10.2020. As a result of the said amendment, a seller who receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding Rs. 50 Lakh in any previous year shall at the time of receipt of such amount collect from the buyer, a sum equal to 0.10% (which is reduced to 0.075% as a covid relief  till 31st March 2020) of the sale consideration exceeding fifty lakhs as income tax.

Section 206C of the Act provides for the collection of tax at source (TCS) on business of trading in alcohol, liquor, forest produce, scrap etc. Sub-section (1) of the said section, inter-alia, provides that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of certain goods a sum equal to a specified percentage, of such amount as income-tax.

Please visit https://itatonline.org/articles_new/tcs-on-sale-of-goods-w-e-f-01-10-2020/ by Advocate V. P. Gupta for detailed explanation on TCS u/s 206C and know more about it.

For Petrol-pumps:

With effect from 01st October 2020 all oil companies have started to charge TCS to all the petrol-pump dealers and correspondingly all dealers have to charge TCS of 0.1% (0.075% till 31st March, 2021 as covid relief) on sale of goods subject to amount received against the sales consideration of GOODS (not services) exceeding 50 lacs subject to dealers aggregate turnover is above 10 crores (which normally always exceeds in case of petrolpumps). The TCS, so Charged and collected from customer have to be paid by 7th of the next month….

Since, Quicksoft is catering to petrol-pumps, we have covered the TCS compliance seamlessly and are pleased to announce that as always we have updated the Quicksoft ArtRM software swiftly for petrol-pumps for compliance of new TCS provisions u/s. 206C(1H) for a petroleum retail outlets.

All you need to do is download the update:

1. All existing users can just download the updated version of software from Help->Whats New->MyFav button and select option tinyurl.com… to download the latest GST version available. New customers can contact quicksoft.services@gmail.com to purchase/download

2. Start the Software and go to Administration->Configuration screen and Enable/Disable TCS system, which by default is enabled automatically for you.

Configure ArtRM for TCS

Configure ArtRM for TCS

The ArtRM is pre-configured to make TCS applicable for you as almost all petrol-pumps are liable to pay and collect TCS for eligible customers and suppliers. The software also automatically creates all required ledgers (TCS PAID, TCS CHARGED..) for you. If you click on < ? > button then it gives you explanation of TCS and general information for users. You just need to change 0.075% to 1% in the next financial year i.e. on 1st April, 2021 so as to auto calculate TCS @0.1%., which means the software is not hard-coding any Tax Rates and all rules are auto configured logically and as chosen by end user.

Round Off TCS Amount: Please tick mark or knock off this option as the case may be, since some OMC’s round off the TCS Amount also along with additional rounding off for the final bill amount.

3. Just Edit the Customers for whom you wish to Charge TCS in customer master.

Mark if TCS is applicable to Selected Customer

Mark if TCS is applicable to Selected Customer

Also make sure to provide the PAN number for the customer so as to apply TCS rate @0.075% or as configured in the system. The software also alerts you if the PAN number is not provided for the selected customer as for Non PAN card holder the rate of TCS is @1%. Also please note, when mouse is moved to Is TCS Applicable to Customer CheckBox then it will display the total receipt for the customer till date in the tooltip as shown in the image above.

 

Similarly you just have to mark the supplier for eligibility to charge TCS. By default all the suppliers are marked as eligible to charge TCS because at petrol-pumps the major supplier is oil companies as Fuel and Oil are always supplied by Oil Marketing Companies (OMC). If your supplier/vendor is not OMC and you are buying some accessory then you have to mark the supplier as non eligible  (as shown in the image above) to charge TCS if their turnover is less than 10 crores or your purchase bill will not tally with their invoice.

*Thats all you need to do to apply TCS in Purchase/Sales Bill.*

To See the Effect of above configuration and application of TCS in action, just start Software and goto Stock-In/Purchase/Challan Entry form, please see the TCS Rate and Amount as shown in the screen below.  When you select the Product and apply taxes (VAT/GST) and cess and you will find TCS automatically applied for Goods as seen in image below. Please note that if the Challan/Bill Date is prior to 01st October 2020 then No TCS will be Charged. Also TCS will not be charged for Service Items like LFR/SSLF (for LFR, separate bill is issued by some oil companies) as software automatically takes care of Service Items where TCS is not applicable. The TCS will also not be charged on Oil and Accessory items, in case the your vendor is not having aggregate turnover above 10 crore and you have marked the vendor/supplier and not eligible to charge TCS….

TCS on Purchase of Fuel

TCS on Purchase of Fuel

Similarly, TCS is automatically charged in Sales Invoice to those customers, to whom you have marked as TCS Applicable, which you can see while generating Invoice on the Invoice Generation form.

Also please note that the effect to Ledger for TCS PAID and TCD CHARGED is automatically posted to the tune of TCS paid to supplier and collected from customer as shown in the images below:

TCS paid to Supplier.

TCS paid to Supplier.

TCS Charged to Customer in Invoice.

TCS Charged to Customer in Invoice.

FAQ : Frequently Asked Questions

Implementing the provision and complying with the requirement of TCS is going to raise many issues. Same are being stated hereunder alongwith with possible view to be taken: –

Sl. No.

Issue

Remarks / Possible view

1. Whether TCS is to be collected in the invoice to be raised or at the time of receipt of sale consideration. Though the section uses the wordings receipt of consideration for sale of any goods, it will be practically difficult to raise demand against the buyer subsequently, if not raised in the invoice and collect TCS from buyer and make payment to the government. Therefore, TCS should be charged in the invoice to be raised for sale of goods.
2. Whether TCS is to be paid within the prescribed time with reference to invoice for sale or same is to be paid with reference to receipt of sale consideration against the invoice. In case, practice of making payment on the basis of receipt of sale consideration is adopted, it will be difficult to match amount of receipt and  TCS with invoice value in the cases where part payments are received against the invoice or in the cases of running account where lump sum payments are received from time to time. Hence, payment of TCS should be made with reference to invoice for sale consideration.
3. Whether TCS is to be collected on total sale consideration or only on the amount in excess of Rs.50 lacs. As per the language of the section TCS is to be collected and deposited only on the amount of sale consideration exceeding Rs.50 lacs and TCS is not to be collected and deposited upto sale consideration of Rs.50 lacs.
4. Whether sale for the full current financial year (2020-21) is to be considered or only the sales made after 01.10.2020 are to be considered. Sale consideration for the full financial year is to be considered for deciding whether Buyer is covered for TCS or not. TCS, however, is to be collected and paid only on the sales made after 01.10.2020 to the extent same are in excess of Rs.50 lacs.
5. In order to decide liability of the seller to collect TCS qualifying turnover of Rs.10 crores is to be considered for current year or of the previous year. As per the wordings of the section seller is liable to collect and deposit TCS during a financial year only if, his gross receipt or turnover of preceding financial year was in excess of Rs.10 crores. In other words, in case, sales / turnover of seller in the preceding year was less than Rs.10 crores he will not be liable to collect TCS in following year.
6. Whether TCS under sub-section (1H) is to be collected and deposited in addition to TCS to be collected and deposited as per other provisions of section 206C of the Act. In case TCS is to be collected and deposited under any other provision of section 206C, TCS is not to be collected and deposited in terms of sub-section (1H) of section 206C.
7. Whether TCS is to be collected on value of goods where the seller is using the goods in executing a contract and buyer / contractee is liable to deduct TDS on total contract value, including cost of material. Section provides that TCS is not to be collected where buyer is liable to deduct TDS and has deducted TDS on value of goods. Hence, in this case TCS is not to be collected.
8. Whether TCS is to be collected on value of goods in a case where contract of sale of goods is independent of providing services by the Seller to Buyer and buyer is liable to deduct TDS on value of services only. Since in this case TDS is not to be deducted on value of goods, Seller will be liable to collect TCS on value of goods.
9. Whether sales made to public sector companies which are substantially or wholly owned by the central government or state government, are subject to TCS. As per the section exemption has been granted only in respect of sales made to central government or state government. Companies owned wholly or substantially by the government are not exempt. Therefore, TCS is to be collected in such cases.
10. Whether TCS is to be collected on advance against sale received from the buyer. Since, advance payment cannot be said to be consideration received against the sale, TCS need not be collected and deposited at the stage of receipt of advance payment. TCS will be charged in the invoice and is to deposited within the prescribed time with reference to date of invoice.
11. In case of multi-units company sales are made from different units and there is no centralized system to determine total amount of sales by the company to a particular buyer, is it possible to apply limit of Rs.50 lacs provided in the section separately for each of the unit / division separately. As per the section in case a seller is making sales to a buyer exceeding Rs.50 lacs, it is liable to collect and deposit TCS.  Therefore, such companies have to develop their system to determine total sale to a particular buyer from all the units. In case for any reason it is not possible for the seller to develop any such system it may be advisable to obtain a certificate from major buyers that their total purchases from all the units / divisions of the company are within the limit of Rs.50 lacs and in the absence of such confirmation TCS may be collected and deposited.
12. Whether in case of a individual person having multiple proprietorship concerns sales made to all the concerns have to be clubbed for the purpose of determining the limit of Rs.50 lacs or each proprietorship concern can be considered separately, though PAN will be same. Since, the person is the same and having one single PAN, sales made to all his proprietorship concerns have to be clubbed together for the purpose of determining the liability for collection and deposit of TCS. It is understood that accounting systems, such as SAP, being used by the companies are having control with name of concerns and not on the basis of PAN and therefore, it will be difficult to aggregate sales against one PAN, if names of concerns are different. It is a practical problem to be solved by modifying control in the program.
13. Whether TCS is also to be collected on the amount of GST included in the invoice. GST will also be part of sale consideration and therefore, TCS is to be collected on total amount of invoice including GST.
14. Whether transportation charges to be recovered from buyer through the invoice raised for sale of goods will be subject to TCS. Since, transportation charge, as per the arrangement between the buyer and seller are payable by the buyer in addition to sale consideration, same cannot be part of sale consideration and, therefore, same can be excluded. However, since the element of TCS will be very small with reference to transportation charges, in order to avoid any accounting adjustment etc. TCS may be collected and deposited on total value of the invoice.
15 Whether export of goods is to be made by the seller himself or it can be through any other buyer being export house or a person actually exporting the goods, for being out of the scope of TCS. The section exempts from liability for collection of TCS “goods being exported out of India”. It does not specifically require that export should be by the seller himself. Therefore, TCS is not to be collected in case buyer provides a certificate with necessary evidence to the effect that goods are being exported out of India.
16. Whether goods imported in India will be exempt from TCS even in a case where initial importer sell the goods to any other person on high sea sale basis. As per the section buyer excludes “a person importing goods into India”. A person to whom sale has been made on high sea sale basis will, in fact be getting the goods cleared from custom and accordingly, he will attain the status of person importing the goods into India.  Therefore, no TCS will be chargeable in respect of high sea sale made by the original importer.

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