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TAX COLLECTION AT SOURCE
Applicability and Rates
Sale of certain goods
Under section 206C(1), sellers of certain goods are required to collect tax from the buyers at the specified rates. The specified percentage for collection of tax at source is as follows:
|
|
Nature of Goods |
Percentage |
|
(a) |
Alcoholic liquor for human consumption |
1% |
|
(b) |
Tendu leaves |
5% |
|
(c) |
Timber obtained under a forest lease |
2.5% |
|
(d) |
Timber obtained by any mode other than (c) |
2.5% |
|
(e) |
Any other forest produce not being timber or tendu leaves |
2.5% |
|
(f) |
Scrap |
1% |
|
(g) |
Minerals, being coal or lignite or iron ore |
1% |
Lease or a licence of parking lot, toll plaza or mine or a quarry
Section 206C(1C) provides for collection of tax by every person who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest in any -
- parking lot or
- toll plaza or
- a mine or a quarry
to another person (other than a public sector company) for the use of such parking lot or toll plaza or mine or quarry for the purposes of business. The tax shall be collected as provided, from the licensee or lessee of any such licence, contract or lease of the specified nature, at the rate of 2%.
Note – Mining and quarrying excludes mining and quarrying of mineral oil. Mineral oil includes petroleum and natural gas. Thus, mining and quarrying excludes mining and quarrying of petroleum and natural gas. Consequently, the oil exploration and incidental services are relieved from the applicability of TCS provisions, since these services are in the organized sector.
The power to recover tax by collection under sub-section (1) or (1C) shall be without prejudice to any other mode of recovery [Sub-section (2)].
Sale of motor vehicle of value exceeding ₹10 lakhs
Section 206C(1F) provides that every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ₹10 lakhs, shall collect tax from the buyer @1% of the sale consideration.
Overseas remittance or an overseas tour package
Section 206C(1G) provides for collection of tax by every person,
- being an authorized dealer, who receives amount, under the Liberalised Remittance Scheme of the RBI, for overseas remittance from a buyer, being a person remitting such amount out of India;
- being a seller of an overseas tour programme package, who receives any amount from the buyer who purchases the package.
- at the rate of 5 % of such amount. Tax has to be collected at the time of debiting the amount payable by the buyer or at the time of receipt of such amount from the said buyer, by any mode, whichever is earlier.
Rate of TCS in case of collection by an authorized dealer
|
S. No. |
Amount and purpose of remittance |
Rate of TCS |
|
(i) |
(a) Where the amount is remitted for a purpose other than purchase of overseas tour programme package; and (b) the amount or aggregate of the amounts being remitted by a buyer is less than 7 lakhs in a financial year |
Nil (No tax to be collected at source) |
|
(ii) |
(a) where the amount is remitted for a purpose other than purchase of overseas tour programme package; and |
5% of the amt or agg. of amts in excess of 7 lakh |
|
(b) the amount or aggregate of the amounts in excess of 7 lakhs is remitted by the buyer in a financial year |
|
|
(a) where the amount being remitted out is a loan obtained from any financial institution as referred under section 80E, for the purpose of pursuing any education; and (b)the amount or aggregate of the amounts in excess of 7 lakhs is remitted by the buyer in a financial year |
0.5% of the amount or aggrigate of amount in excess of ` 7 lakh |
Cases where no tax is to be collected
|
(i) |
No TCS by the authorized dealer on an amount in respect of which the sum has been collected by the seller |
|
(ii) |
No TCS, if the buyer is liable to deduct tax at source under any other provision of the Act and has deducted such tax |
|
(iii) |
No TCS, if the buyer is the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority 6 or any other person notified by the Central Government, subject to fulfillment of conditions stipulated there under |
Sale of goods of value exceeding ₹50 lakh
- As per section 206C(1H), tax is also required to be collected by a seller, who receives any amount as consideration for sale of goods of the value or aggregate of such value exceeding ` 50 lakhs in a previous year [other than exported goods or goods covered under sub-sections (1)/(1F)/(1G)].
- Tax is to be collected at source @0.1% u/s 206C(1H) of the sale consideration exceeding ` 50 lakhs, at the time of receipt of
- Tax is, however, not required to be collected if the buyer is liable to deduct tax at source under any other provision of the Act on the goods purchased by him from the seller and has deducted such.
Power of the CBDT to issue guidelines
In case any difficulty arises to give effect to the provisions of section 206C(1G)/(1H), the CBDT is empowered to issue guidelines, with the approval of the Central Government, for the purpose of removing the difficulty.
Every guideline issued by the CBDT shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person liable to collect tax.
Meaning of certain terms
|
|
Term |
Meaning |
|
(i) |
Overseas tour program package |
For section 206C(1G) Any tour package which offers visit to a country/(ies) or territory/(ies) outside India. It includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto. [Clause (ii) of Explanation to section 206C(1G)] |
|
(ii) |
Buyer |
For section 206C(1) A person who obtains in any sale, by way of auction, tender, or any other mode, goods of the nature specified in the Table in point (1) or the right to receive any such goods but does not include – (A) a public sector company, the Central Government, a State Government, and an embassy, a high commission, legation, commission, consulate and the trade representation, of a foreign State and a club, or (B) a buyer in the retail sale of such goods purchased by him for personal consumption [Explanation to section 206C] For section 206C(1F) A person who obtains in any sale, goods of the nature specified therein, but does not include – (A) the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or (B) a local authority or (C) a public sector company which is engaged in the business of carrying passengers. [Explanation to section 206C] For section 206C(1H) A person who purchases any goods but does not include (A) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State, or (B) a local authority; or (C) a person importing goods into India or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to stipulated conditions. [Clause (a) of Explanation to section 206C(1H)] |
|
(iii) |
Seller |
For section 206C(1) and section 206C(1F) (i) The Central Government, (ii) a State Government or |
|
|
|
(iii) any local authority or (iv) corporation or (v) authority established by or under a Central, State or Provincial Act, or (vi) any company or (vii) firm or (viii) co-operative society Seller also includes an individual or a HUF whose total sales, gros receipts or turnover from the business or profession carried on by hi exceed ` 1 crore in case of business and ` 50 lakhs in case of professio during the financial year immediately preceding the financial year in whic the goods of the nature specified in the Table in point (1) are sold [Explanation to section 206C] For section 206C(1H) A person whose total sales, gross receipts or turnover from the business carried on by him exceed ` 10 crores during the financial year immediately preceding the financial year in which sale of goods is carried out. However, seller does not include a person as notified by the Central Government for this purpose, subject to fulfillment of conditions stipulated [Clause (b) of Explanation to section 206C(1H)] |
|
(iv) |
Scrap |
Waste and 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 to section 206C] |
CBDT Clarifications & Press Release
The amendments in section 206C have given rise to certain issues relating to the scope and applicability of the provisions. Accordingly, certain clarifications are provided through circulars/press release enlisted below.
Clarification relating to certain issues with respect to section 206C(1F)
The CBDT has, vide Circular No. 22/2016 dated 8.6.2016, clarified the following issues in “Question & Answer (Q & A)” format.
Whether TCS @1% is on sale of motor vehicle at retail level or also on sale of motor vehicles by manufacturers to dealers/ distributors?
To bring high value transactions within the tax net, section 206C has been amended to provide that the seller shall collect the tax @ 1% from the purchaser on sale of motor vehicle of the value exceeding 10 lakhs. This is brought to cover all transactions of retail sales and accordingly, section 206C(1F) will not apply on sale of motor vehicles by manufacturers to dealers/distributors.
Whether TCS @1% on sale of motor vehicle is applicable only to luxury cars?
No, as per section 206C(1F), the seller shall collect tax @1% from the purchaser on sale of any motor vehicle of the value exceeding ` 10 lakhs.
Whether TCS @1% is applicable in the case of sale to Government Departments, Embassies, Consulates and United Nation Institutions, of motor vehicle or any other goods or provision of services?
Government, institutions notified under United Nations (Privileges and Immunities) Act 1947, and Embassies, Consulates, High Commission, Legation, Commission and trade representation of a foreign State shall not be liable to levy of TCS @1% under section 206C(1F).
Whether TCS is applicable on each sale of motor vehicle or on aggregate value of sale during the year?
Tax is to be collected at source @1% on sale consideration of a motor vehicle exceeding ` 10 lakhs. It is applicable to each sale and not to aggregate value of sale made during the year.
Whether TCS @1% on sale of motor vehicle is applicable in case of an individual?
The definition of "Seller" as given in clause (c) of the Explanation below sub-section (11) of section 206C shall be applicable in the case of sale of motor vehicles also.
How would the provisions of TCS on sale of motor vehicle be applicable in a case where part of the payment is made in cash and part is made by cheque?
The provisions of TCS on sale of motor vehicle exceeding 10 lakhs is not dependent on mode of Any sale of motor vehicle exceeding ` 10 lakhs would attract TCS @1%.
In exercise of the power to issue guidelines, the CBDT has, with the approval of Central Government, vide Circular no. 17/2020 dated 29.9.2020, issued the following guidelines for removing certain difficulties-
Applicability on transactions carried through various Exchanges
In order to remove practical difficulties in implementing section 206C(1H) in case of certain exchanges and clearing corporations, it has been provided that section 206C(1H) shall not be applicable in relation to
- transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service Centre.
- transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC (Central Electricity Regulatory Commission).
Applicability on sale of Motor vehicle
The provisions of section 206C(1F) apply to sale of motor vehicle of the value exceeding 10 lakhs. Section 206C(1H) excludes from its applicability goods covered under section 206C(1F). It may be noted that the scope of sections 206C(1H) and (1F) are different.
While section 206C(1F) is based on single sale of motor vehicle, section 206C(1H) is for receipt above 50 lakhs. Hence, in order to remove difficulty that whether all motor vehicles are excluded from the applicability of section 206C(1H), it is clarified that-
- Receipt of sale consideration from a dealer would be subjected to TCS under section 206C(1H), if such sales are not subjected to TCS under section 206C(1F)
- In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value of 10 lakhs or less to a buyer would be subjected to TCS under section 206C(1H), if the receipt of sale consideration for such vehicles during the previous year exceeds 50 lakhs during the previous
- In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value exceeding 10 lakhs would not be subjected to TCS under section 206C(1H) if such sales are subjected to TCS under section 206C(1F).
Adjustment for sale return, discount or indirect taxes
It is been clarified that no adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under section 206C(1H) since the collection is made with reference to receipt of amount of sale consideration.
Fuel supplied to non-resident airlines at airports in India
It is provided that the provisions of section 206C(1H) shall not apply on the sale consideration received for fuel supplied to non-resident airlines at airports in India.
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