Section 206C - TCS on Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc [ Section 206C(1) to (1E) ] - Income Tax - Ready Reckoner - Income Tax

TCS on Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc - [ Section 206C (1) to (1E) Read with Rule 31AA ] Section 206C(1) : Profit and Gains from Business of trading in alcoholic liquor, forest produce, scrap, etc. Every person, being a seller shall at the time of debiting 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, whichever is earlier, collect from the buyer, a sum equal to the following percentage of the purchase price, as income-tax. S.No Nature of goods Rate tax collection at source of Purchase Price 1. Alcoholic liquor for human consumption 1% 2. Tendu Leaves 5% 3. Upto 31.03.2025 - Timber obtained under a forest lease 2.5% From 01.04.02025 - Timber or any other forest produce (not being tendu leaves) obtained under a forest lease [ Amended vide Finance Act 2025 ] 2% 4. Timber obtained by any mode other than under a forest lease Upto 31.03.2025 - 2.5% From 01.04.2025 - 2% [ Amended vide Finance Act 2025 ] 5. Any other forest produce not being timber or tendu leaves [ W.e.f. 01.04.2025 Omitted vide Finance Act 2025 ] 2.5% 6. Scrap 1% 7. Mineral being coal or Lignite or Iron Ore 1% Meaning of scrap:- Scrap means waste or scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. [Explanation (b) to section 206C ] According to Navine Fluorine International Ltd. Versus The A. CIT, TDS Circle [ 2011 (2) TMI 1110 - ITAT, Ahmedabad ] The explanation to section 206 C of the IT Act provides the meaning of scrap means waste and scrap from manufacture or mechanical working of material which is definitely not usable as such because of breakage, cutting up, wear and other reasons. In the above definition the important words used in the definition of scrap are waste and scrap from manufacture and which is . The word waste and scrap are one item. Thereafter, the word used is from the manufacture or mechanical working of material. It would mean that the waste and scrap being one item should arise from the manufacture or mechanical working of material. It is, therefore, necessary to read the words waste and scrap together which are generated out of manufacturing process of the assessee. The words waste and scrap should have nexus with the manufacturing or mechanical working of material. The words waste and scrap thus cannot be read differently. Thereafter, the word used is which is definitely not usable. The word is as used in this definition of the scrap meant for singular item i.e. waste and scrap . The word waste which is denotes to singular item and thus the singular item would be waste and scrap. The findings of the learned CIT(A) are based on presumption only that since the assessee is engaged in manufacture of fluorine and other refrigerated gases, therefore, entire scrap is generated out of its manufacturing activities. Non-applicability of section 206C(1) Self declaration by buyer if relevant goods are purchased for manufacturing or producing any articles or things [ Section 206C(1A) Rule 37C ] No collection of tax shall be made in the case of a resident buyer, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form ( Form No. 27C ) and verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things, or for the purposes of generation of power and not for trading purposes. Declaration furnished u/s 206C(1A) to be delivered to the Principal Chief Commissioner [ Section 206C(1B) ] The person responsible for collecting tax under this section shall deliver or cause to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner one copy of the declaration referred to in sub-section (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him. Every person, who grants a lease or a licence or enters into a contract or otherwise transfers for parking lot or toll plaza or mine or quarry Section 206C(1C) Any right or interest in any parking lot or toll plaza or mine or quarry to another person, other than a public sector company (herein after called as Licencee or Lessee ) for the use of such parking lot or toll plaza or mine or quarry for the purposes of business shall, at the time of debiting of the amount payable by the licencee or lessee to the account of the licencee or lessee or at the time of receipt of such amount from the licencee or lessee, whichever is earlier, collect from the licencee or lessee 2% of such amount as Income-Tax. SECTION 206C(1D):- [Omitted by FA, 2017,w.e.f. 1-4-2017 ] SECTION 206C(1E):- [Omitted by FA, 2017,w.e.f. 1-4-2017 ] Note: The buyer shall get credit of TCS collected by seller. No TCS has to be collected where: (i) Buyer is a public sector company (ii) Buyer is a Central Govt., State Govt. (iii) Buyer is a club (iv) Buyer is embassy, High commission, Consulate or trade representative of a foreign state. (v) Buyer buys the above goods for his personal consumption. Important Notifications Circulars Various clarification has been issued regarding collection of income-tax at source under section 206C of the Income-tax Act, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc. Clarification I [ Circular No. 525, dated 24-11-1988 ] Clarification II [ Circular No. 535, dated 26-6-1989 ] Clarification III [ Circular No. 565, dated 11-7-1990 ] Clarification IV [ Circular No. 585, dated 27-11-1990 ] Clarification V [ Circular No. 620, dated 6-12-1991 ] Clarification VI [ Circular No. 634, dated 20-8-1992 ] Clarification VII [ Circular No. 660, dated 15-9-1993 ]