The government introduced a new section via the Finance Act, 2020, Section 206C(1H), extending TCS (Tax Collected at Source) provision on the sale of goods. Any seller with a turnover of more than Rs 10 crore is supposed to collect tax, when a payment of more than Rs 50 lakh from one buyer is received during the financial year. TCS is collected at the time of receipt of the amount.
How is TCS calculated and when is it collected?
TCS has been applicable since October 1, 2020. The seller of goods is supposed to levy 0.1% tax on receipt of value in a financial year from the buyer.
Pointers to remember while calculating TCS
- The provision applies only to sellers with annual turnovers of more than Rs 10 crore.
- The term goods does not include exports and goods under Section 206C(1)- TCS on sale of alcohol, forest produce, tendu leaves, and scrap; Section 206C(1G)- TCS on foreign remittance; Section 206C(1F)- TCS on sale of motor vehicles.
- If the buyer of the goods deducts TDS, the seller need not deduct TCS for those goods.
- TCS is not deducted if the buyer is a state/central government, high commission, consulate, embassy, trade representation of a foreign state or a local authority.
- TCS is not applicable on the import of goods to India.
Is TCS charged on the total invoice amount?
The seller includes TCS in an invoice as follows:
Value of goods (in Rs)
1,50,00,000
GST @ 18%
27,00,000
Total invoice amount (in Rs)
1,77,00,000
TCS on the total amount @ 0.1%
17,700
Total invoice amount to be paid by the buyer (in Rs)
1,77,17,700
What is the due date of depositing TCS?
Since the seller is responsible for collection and payment of the TCS, he should pay the TCS by the 7th of the following month.
For example, for a transaction made on December, 9, 2022, TCS should be paid to the government by January 7, 2023.
Impact of TCS on e-invoicing
e-invoicing is being implemented in a phase-wise manner in our country to ensure no tax evasion by B2B companies. This mandates every invoice be reported to the government and put up on the government portal.
When it was introduced, e-invoicing was made applicable to only the businesses with turnovers of more than Rs 50 crore but, from April 1, 2020, it became applicable to businesses with turnovers greater than Rs 20 crore.
Under the recent e-invoicing mandate, TCS amount is included in other charges on the invoice. In GSTR-1, too, the amount reported will include TCS.
The TCS provision is applicable on a receipt basis and not a sale. The seller will have to charge TCS in advance and later adjust it in the invoice. TCS should be collected on a receipt basis rather than at the time of issuing of an invoice.
FAQs
Is the GST amount included in the calculation of TCS?
No, the GST amount is not to be included in the calculation of TCS as TCS is calculated on receipt of consideration and not the sale.
Is TCS applicable to SEZ units?
Even though sales by SEZ units are considered export, the TCS will be collected if the amount received from the buyer crosses the Rs 50 lakh threshold.
Is the supply of services included under the TCS act?
No, the act is applicable only to the sale of goods and not services.
What is the due date for filing TCS returns?
Every tax collector should submit the TCS return by the 15th of the month subsequent to the quarter. However, the TCS return for the month of Jan-Mar can be filed by 15h May of the following year.
What will be TCS if the buyer has no Aadhaar or PAN?
The TCS is deducted at the rate of 1%.
For calculating the annual turnover of Rs 10 crore, should the sale of services be considered?
Yes, section 206C(1H) states that the total turnover of the business is to be considered. Thus, the sale of services should be included.
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