Act –
“Every person, being a seller, who receives
any amount in cash as consideration for sale of bullion 35[***] or jewellery, or any
goods (other than bullion or jwellery) 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.
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.”
-
Sub Section 1D of Section 206C
Q1.
Rate at which tax to be collected at source?
A 1.
At the rate
of 1%, on Sales consideration tax is to be collected at source.
Q2.
Value means for collection of Tax at source?
A 2.
Here value
means Sales Consideration i.e. Invoice Amount.
Q3.
If goods/services sold/provided of value Rs.
2,00,000/- whether TCS provisions will be applicable?
A 3.
Based on the
reading of the provisions, it is inferred that TCS Provision will not be
applicable, as act uses the word exceeding Rs. Two lakh, however do
not include Rs. Two lakh.
Act – “….value exceeding
two lakh rupees”.
Q4.
If consideration of amount for goods
sold/provision of service received directly in Bank account; whether
applicable?
A 4.
No, as TCS
provision applicable only if any amount of sales consideration received in
cash.
Q5.
If consideration of amount for goods sold/provision
of service, directly deposited by customer in the bank account of seller?
A 5.
Yes, then
TCS provision is applicable, as amount received in cash but deposited in bank.
Q6.
Does receipt of bearer cheque or cheque which
is crossed without the words “account payee” amount to receiving consideration
in cash?
A 6.
Since
Section 206 (1D) uses the words cash, and not “otherwise than by crossed
account payee cheque or bank drafts” like in other provisions, it would appear
that bearer cheque or cheques crossed without the words “account payee” would
not be regarded as “cash”. This matter also needs CBDT's clarification.
Q7. Whether TCS is applicable where goods are exchanged
under Barter System [say Motor Vehicle is exchanged for another Motor Vehicle]
A 7.
Since TCS is
applicable only to receipt of cash as consideration for sale, TCS provisions
u/s 206C(1D) shall not apply where payment is received through exchange of
goods.
But provided if
after exchange, certain amount is received in cash, TCS provision will be
applicable and therefore tax @ 1% to be collected on entire Invoice Value.
Q8.
Whether TCS to be collected, if Goods
sold/Services provided of value exceeding Rs. 2,00,000 purchased/received for
personal consumption from Retail Buyer?
A 8.
Yes, still
TCS provision will be applicable as not exception for such clause is there;
every buyer/service provider is covered under these section.
Q9.
Collection of TCS to be on Receipt basis or on
Invoice basis?
A 9.
Collection
of TCS to be on Receipt basis; no regards to when Invoice raised.
Act – “Every
person being a seller,…………….at the time of receipt of such amount,
collect from the buyer…………” – Sub Section 1D.
Q10.
In case Invoice generated before applicability
of law and amount received in cash after June, 2016; whether TCS provision will
be applicable?
A 10.
Based on the
reading of the provisions, it is inferred that, no liability arises to collect
TCS; as event arises (Sale of Goods/Provision of Service) already before
applicability of law, no need to collect tax at source along with amount
received for sale consideration during the period, law became effective.
Yet the CBDT’s
clarification on such issue is pending.
Q11.
In case goods delivered/ services provided and
complete invoice amount received before June, 2016 and Invoice generated on or
after 1st June, 2016; whether liability to collect TCS arises?
A 11.
Yes,
liability to collect TCS arises, as event; generation of invoice is during the
period of applicability of law, however if no amount received in cash during
the period of applicability of law, then no need to collect TCS. From customer
amount of TCS is to be asked and collected, if required.
For
applicability, 2 events must occur – invoice generation + cash receipt, in law
applicability period.
Example – Car
delivered and complete sales consideration received in May, 2016 but Invoice
generated in June, 2016 no need to collect TCS.
However in above
example, if in June, 2016 any amount i.e. may be Rs. 5,000 received in cash
then liability to collect TCS arises on complete invoice amount.
Q12.
Limit of Rs. 2,00,000/- will be considered on amount inclusive of Tax
or exclusive of Tax?
A 12.
Based on the
reading of the provisions, it is inferred that, for Limit amount will be
considered inclusive of VAT/Service Tax i.e. Sales Consideration.
Q13.
Rate of 1% for collection of TCS to be charged
on Value inclusive of Tax or exclusive?
A 13.
TCS to be
collected on Value inclusive of VAT/Service Tax i.e. on our Invoice Amount.
Act – “…….a sum
equal to one percent of the Sale Consideration as income tax”.+
Q14.
Discount given to buyer/service provider will
be considered or not?
A 14.
TCS to be
collected on Invoice Value (which is after deducting discount), which means
discount to be considered, if and only if discount is given on Invoice value,
in case is given through any mode, say by raising credit not discount will not
be considered.
Act – “…….a sum
equal to one percent of the Sale Consideration as income tax”.
Q15.
If bill raised, for two different goods
sold/two different services provided and single bill raised, whose value
exceeds Rs. Two Lakh, whether TCS provision will be applicable?
A 15.
Yes, TCS is
to be collected, as the seller/service provider create a single invoice, it can
be for two different goods/services. So even though the individual value do not
exceed Rs. Two Lakhs, but if the invoice amount exceeds Rs. 2,00,000, then TCS
is to be collected from customers.
Q16.
In case TDS Provisions are applicable on
amount on which TCS provision are also applicable, which provision will
override?
A 16.
TDS
provisions override the provision of TCS {Proviso of Section (206C) (1D) (iii)}.
If value of services exceeds Rs. 2,00,000/- and any amount received in cash,
liability to collect TCS arises until and unless on such provision of service
no amount is deducted under Chapter XVII-B.
Q17.
Whether TCS to be collected, in case amount on
which TDS not deducted does not exceed Rs. 2,00,000/-?
A 17.
Yes, still
to be collected consider example given above.
Q18.
TDS Provisions applicable on part of the
amount only, then TCS is to be collected? If yes, on what amount?
A 18.
Based on the
reading of the provisions, it is inferred that yes still TCS to be collected,
but not on complete Invoice amount, amount of TCS to be collected only on
amount on which TDS has not been deducted, provided any such amount received in
Cash.
Example – Service
provided of Rs. 2,50,000; from service receiver Rs. 2,00,000 received after
deduction of TDS on such amount and rest Rs. 50,000 received in cash from
service receiver. TCS is to be collected on Rs. 50,000/- at the rate of 1%,
therefore from service receiver Rs. 50,500 (50000+500) to be collected.
Example – Service
provided of Rs. 2,50,000; and Rs.
2,00,000 received after deduction of TDS on such amount and rest Rs. 50,000
received in cheque, from service receiver; no need to collect TCS.
Example – Service
provided of Rs. 2,50,000; and Rs. 2,00,000 received after deduction of TDS on
such amount and rest Rs. 45,000 received in cash and Rs. 5,000 in cheque, from service
receiver. TCS is to be collected on Rs. 50,000/- at the rate of 1%, therefore
from service receiver Rs. 50,500 (50000+500) to be collected.
Q19.
Is the threshold limit Rs. 2,00,000 ;
transaction-wise/ person - wise or in aggregate?
A 19.
Based on the
reading of the provisions, it is inferred that the threshold limit for the
purpose of collection of tax of Rs. 2,00,000 in case of sale of goods/provision
of services should be considered transaction-wise and not aggregate of all the
transactions for the year.
Example – In case
of Motor Vehicle, to a single customer, 3 old cars are sold of value Rs.
1,50,000 and Rs. 1,80,000 and Rs. 1,90,000 with three different invoice raised.
Now here since limit
of Rs. 2,00,000 will be considered transaction wise i.e. Value of each car sold
though different invoice, and in above said example no Invoice Value (i..e
value of old car) exceed Rs. 2,00,000. Therefore, no liability to collect Tax
at Source arises.
Q20.
If motor vehicle sold of value less than Rs.
10,00,000 but more than Rs. 2,00,000 and any amount of sales consideration
received in cash; whether TCS provision will be applicable?
A 20.
Based on the
reading of the provisions, it is inferred that still TCS provision will be
applicable under sub section 1D; as 3 condition of section satisfied, value of
goods(Motor vehicle) exceed Rs. 2,00,000 and any amount of sales consideration
received in cash and no provision of TDS applicable on such sale of motor
vehicle. So TCS provision will be applicable.
From reading the
provision, clause (iii) of sub section 1D excludes only clause (i) and
clause(ii) of such sub section, which means clause (iii) covers every event of
sale of any goods (i.e. it can be motor vehicle), other than bullion or jewelry
of value more than Rs. 2,00,000 provisions of TCS will be applicable.
This matter needs
further CBDT’s clarification.
Q21. Whether TCS
provisions under section 206C(1D) also cover the goods or services covered by other provisions?
A 21.
As there is
general rule, one which may follow, which is the “Latin Maxim Generalia
Specialibus Non Derogant” i.e. “the provisions of a general statute must yield
to those of a special one”.
As per this rule
if for particular situation a specific provision is there, then specific
provision will override the general provision.
Say for example,
motor vehicle of value Rs. 11,00,000 sold in cash, now issue arises is that
whether 206C(ID) can result in Duplication of levy of tax, as for such
situation already specific provision under sub section (1F) is there.
Here sub section
(1F) of such section will prevail.
But the matter
should have been clarified by the legislature instead of leaving the taxpayer
to the mercy of tax officials.
Q22.
Amount of Sale Consideration received in
parts/stages?
A 22.
Based on the
reading of the provisions, it is inferred that; yes, on first receipt itself
the TCS to be collected, which means TCS is to be collected along with first
receipt itself.
Act – “ Every
person, being a seller, who receives any amount as consideration
for sale of…………, shall at the time of receipt of such amount,
collect from the buyer, a sum equal to one percent of the sale consideration
as income tax.: - Sub Sec. 1D.
In case of sale
of motor vehicle : - practically, it’s not possible to collect TCS on full
amount of Sales consideration, at the time of booking motor vehicle of value
exceeding Rs. 10,00,000, with booking amount itself; therefore considering
practical life, amount on which 1% to be charged for collection of TCS is
Booking Amount.
Further, on every
second receipt of sales consideration full amount of Tax can be collected at
source less already received at the time of booking a motor vehicle.
Booking amount
received will be inclusive of Tax required to collect at source. Means whatever
amount we are receiving to book a motor vehicle is 101% which includes 1% of
Income Tax collected at source.
Example in case,
sale of Motor Vehicle–
·
car booked of
value Rs. 11,00,000 on 7th June, 2016 with receipt of Rs. 11,000
(here booking amount is Rs. 10891 – 100% and tax Rs. 109 – 1%) &
·
On 11th
June, 2016 amount received Rs. 5,00,000/- and on 5th July, 2016 rest
amount, Rs. 589000/- received.
·
Here on 11th
June, 2016 along with Rs. 5,00,000 (1st receipt after booking
amount) TCS of Rs. 10890/- (1% of Rs. 1089000/-) to be collected and so on 11th
June,2016 net amount to be taken is Rs. 510890/- (500000+10890)
·
On 5th
July, only Rs. 5,89,000/-.
This matter needs
further CBDT’s clarification.
Q23.
In case, motor vehicle of value more
that Rs. 2 Lakh but less than or equal to Rs. Ten Lakh, financed and part amount
received from Financer and some amount in cash from buyer, when and how TCS to
be collected?
A 23.
As from
above answer, tax is to be collected at the rate of 1% on booking amount at the
time of booking and rest amount of TCS i.e. 1% on sales consideration, after
deducting TCS collected at the time of booking; but in Finance case, part of
the amount is received from Financer, here at the time of receiving margin
money (before receiving money from Financer) from buyer tax at the rate of 1%
can be collected, considering practical situation.
This matter needs
further CBDT’s clarification.
Q24.
Whether liability of TCS arises in case of
motor vehicle sold of value more than Rs. Two Lakh in cash and invoice is
directly generated by Dealer and invoice value received by Retail Seller? If
yes, then on whom liability of collection arises?
A 24. Yes,
obvious liability to collect TCS arises, but here the question arises "on
whom". Since the amount of Invoice value is collected by Retail Seller so
practically tax should also be collected by Retail Seller itself and be paid by
Retails Seller to Government and reflect such transaction in there Quarterly
Return; until and unless any clarification or guideline received by Retail
Seller from there Dealer.
So it is
advisable to collect tax from buyer by Retails Seller only.
Yet
the matter need further CBDT's clarification.
Q25.
In case any amount received, refunded to buyer/service
receiver after payment of TCS to Government, in the event service being not
provided/ or sold goods returned?
A 25.
To
buyer/service receiver, amount refundable can be amount agreed between
seller/service provider and buyer/service receiver, in respect of Goods
sold/Provision of Service, not amount collected from buyer/service receiver for
TCS can be refunded to buyer/service receiver, as tax collected from customer
would being already paid to Government and in Act there is no provision of
refund of TCS deposit or to adjust such TCS deposit, only provision for TDS is
specified.
So practically,
it would not be possible to refund tax to buyer/service receiver on
cancellation of services to be provided or return of goods of value exceeding
Rs. Ten Lakh after depositing it with Government.
Q26.
Non availability of PAN of Buyer.
A 26.
For the
other part of prepaid taxes, that is TCS, new section 206AA is not applicable.
This section covers only the payments under Chapter 17B of Income Tax Act. TCS
falls under Chapter 17BB. So any Tax collected through TCS provision, does not
makes sense of higher rate determination i.e. 20% for PAN deficiency.
Final
thoughts
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 goods/
provision of services of the value exceeding two lakh rupees
What do you think of this new Tax Collect at Source? Please feel
free to share your thoughts in comments section below.
This Article has been shared by Rani Jain.
Subscribe to our mailing list to get the updates to your email inbox.. Just Enter your email id below and click on subscribe button! After that, verify it through the verification email received on your email id and start learning more!..
Posts
