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TCS under section 206C, BY SELLER OF GOODS AND SERVICE PROVIDERS when consideration is received in cash (w.e.f. 01st June 2016)

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TCS under section 206C, BY SELLER OF GOODS AND SERVICE PROVIDERS when consideration is received in cash (w.e.f. 01st June 2016)
By: CA DEV KUMAR KOTHARI
June 14, 2016
  • Contents

Relevant portions of S.206C regarding obligation for collection in simplified manner.

Section 206C for Tax collection at source:

In Chapter XVII sub-chapter BB- ‘Collection at source’   was inserted w.e.f. 01.06.1988. S.206C is about obligations and related liabilities for TCS. The provisions have been amended too many times. In any standard book or website we find more than 50 foot notes about amendments. Related Rules have also been inserted and / or amended many times.

To simply convey about new obligations related with TCS on sale of goods and providing services an attempt has been made to put the provisions in simple manner. In the table, in left column relevant provision has been reproduced with highlights for easy analysis and understanding. In right column, main points are mentioned in simple language.

Income-tax Act, 1961    [BB.-Collection at source

Simplified main points

Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.

Section 206C.

Bullion, jewellery and now other goods and services have been added but heading has not been changed. So one need to read section very carefully.

xxx

 

[(1D) Every person, being a seller, who receives any amount in cash as consideration for sale of bullion 45[***] or jewellery, 48[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,-

 

TCS @ 1% is applicable only when consideration is received in cash in excess of limits.

Seller and buyer have been defined in explanation.

When turnover exceeds limit for tax audit, in preceding year. TCS is applicable even to individual and HUF

(i)  for bullion,   xxx

 

(ii)  for jewellery, xx  

 

(iii) for any goods, other than those referred to in clauses (i) and (ii), or any service, exceeds two hundred thousand rupees:

Rs. two lakh is limit. On reading of provisions, limit seems applicable to each case of receipt of consideration in cash.

 

 

Provided that no tax shall be collected at source under this subsection on any amount on which tax has been deducted by the payer under Chapter XVII-B.]

 

If tax has been deducted by payer than TCS will not apply- this is presently only for contracts and many services.

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.

 

Exceptions will be as may be prescribed.

(1F) Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent. of the sale consideration as income-tax.]

 

Sale of motor vehicle, when consideration for a motor vehicle exceeds of  Rs. ten lakh TCS @ 1% is provided irrespective of mode of payment received.

The limit is applicable for each motor vehicle.

(2) The power to recover tax by collection under sub-section (1) 8[or sub-section (1C) 42[or sub-section (1D)]] shall be without prejudice to any other mode of recovery.

 

TCS is in addition to other modes of recovery of tax by revenue.

(3) Any person collecting any amount under sub-section (1) [or sub-section (1C)   [or sub-section (1D)]] shall pay within [the prescribed time] the amount so collected to the credit of the Central Government or as the Board directs:

 

TCS will have to be paid within prescribed time limits.

 

 

(6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3).

 

Failure to collect tax shall not absolve from liability- amount collectible will have to be paid, whether collected or not.

[(6A) If any person responsible for collecting tax in accordance with the provisions of this section does not collect the whole or any part of the tax or after collecting, fails to pay the tax as required by or under this Act, he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax:

 

Full or partial failure in collection and payment will lead the treatment of  assessee in default in respect of the tax:

 

(7) Without prejudice to the provisions of sub-section (6), if the [person responsible for collecting tax] does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of [one] per cent per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid [and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions

 

Liability for interest.

(8) Where the tax has not been paid as aforesaid, after it is collected, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (7) shall be a charge upon all the assets of the 28[person responsible for collecting tax].]

 

Un paid TCS and interest thereon shall be a charge upon all the assets of the person responsible for collecting tax.

 

[(9) Where the Assessing Officer is satisfied that the total income of the buyer 30[or licensee or lessee] justifies the collection of the tax at any lower rate than the relevant rate specified in sub-section (1) 31[or sub-section (1C) 42[or sub-section (1D)]], the Assessing Officer shall, on an application made by the buyer 32[or licensee or lessee] in this behalf, give to him a certificate for collection of tax at such lower rate than the relevant rate specified in sub-section (1) 33[or sub-section (1C) 42[or sub-section (1D)]].

Application by buyer / service receiver and grant for TCS at lower rate.

(10) Where a certificate under sub-section (9) is given, the person responsible for collecting the tax shall, until such certificate is cancelled by the Assessing Officer, collect the tax at the rates specified in such certificate.

 

Lower TCS certificate will prevail unless cancelled.(or limit expires- if it is granted for limited period)

(11) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (9) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.]

Rules will govern application, and grant for lower TCS certificate.

Explanation.-For the purposes of this section,-

 

44[(a)  "accountant" shall have the meaning assigned to it in the Explanation to sub-section (2) of section 288;

 

aa) "buyer" with respect to-

                   (i)   xxx

             (ii) sub-section (1D) 52[or sub-section (1F)] means a person who obtains in any sale, goods of the nature specified in the said sub-section;

 

        (c) "seller" means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society and also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which the goods of the nature specified in the Table in sub-section (1) [or sub-section (1D)] are sold [or services referred to in sub-section (1D) are provided].]]

 

 

By: CA DEV KUMAR KOTHARI - June 14, 2016

 

 

 
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