TCS on cash sale of goods/services

TCS ON SALE OF GOODS/SERVICES IN CASH ABOVE RS.2LAKHS

Finance Act, 2016 imposed TCS on cash sale of goods or services w. e. f 1-6-2016.

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 2lakhs rupees; or

(ii) for jewellery, exceeds 5lakhs rupees or

(iii) for any goods, other than those referred to in clauses (i) and (ii), or any service, exceeds 2lakhs 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

Analysis of Provision of TCS on cash sale of goods or services : Conditions

1. Sale of any goods or any services (other than bullion or jewellery)
2. Consideration for goods or services exceeds Rs. 2,00,000 in a (single) bill
3. Out of such consideration, any amount is received in cash
4. The seller will collect tax at the rate of 1% of sale consideration
5. The seller will collect tax at the rate if sale is made or service is rendered w.e.f 01.06.2016
6. Tax will be collected at the time of receipt of any amount in cash.
7. The seller will not be obliged to collect the tax, if the buyer has deducted the tax at source from the payment.
8. 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.
9. 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.

Example- MR A purchases goods from distributor for Rs. 8.00 lac on 10.06.2016, payment of Rs. 795000/- has been made by cheque/RTGS on 11.06.2016, balance 5000/- has been paid in Cash on 12.06.2016. Please note that Seller has to collect TCS @ 1% on Rs. 800000/- (i.e Rs. 8000/-).

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 Buyer and Seller
(a) Seller:

According to this provision every following person is covered under the scope of the seller for

the purpose of TCS:

1. The Central and State Government.

2. Local authority

3. Statutory corporation or Authority

4. Company

5. Firm

6. Co-operative society

7. Individual or Hindu undivided family(HUF) if covered under section 44AB (mandatory

Audit)

Buyer

According to the this provision (Explanation to Sec 206c)  Buyer Means a person who obtains in any sale, by way of

auction, tender or any other mode, the specified goods ,or right to receive any such goods

but does not include

1. Public sector company,

2. Central/State Government,

3. Embassy, a High commission, legation, consulate and the trade representation of a

foreign state and

4. A Club

5. A buyer in the retail sale of such goods purchased for personal consumption

QUICK SUMMARY

1. Goods purchased by end use consumers are not covered under TCS ‘
2.  No cash payment to be made even in part against Single Bill exceeding 2 Lacs, otherwise Seller to deduct TCS.
3.  TCS to be collected on amount of Rs200,000 or more, it means no TCS upto 199,999/-
4.  No TCS if TDS is deducted by buyer
5. Consideration for goods or services exceeds Rs. 2,00,000 in a (single) bill.
6. Even if part payment is received in cash for the bill exceed Rs.200,000/- then the seller has to collect TCS
7. TCS is collected u/s 206(1D).
8. Quarterly returns to be filed by the seller.

            CA Poonam Jain

            (poonam.ca.jain@gmail.com)