Note on Tax Collection at Source – TCS
If you had a Turnover or Business Receipts in excess of Rs. 10 crores in the preceding year and If you have any buyers who buy more than Rs. 50 Lakhs of goods from you in the year, then you must read this:
Finance Bill 2020 introduced a new provision relating to TCS which is to be collected by the seller from a buyer when the buyer pays for goods purchased in excess of Rs. 50 Lakhs during the year. TCS is required to be collected by the Seller at the time of receipt of payment from the buyer in addition to the payment for the goods and paid to the Government.
How does this impact your sales to Customers?
- The TCS provision will be effective October 1, 2020 and is applicable to an assessee whose turnover or total Business receipts in FY 2019-20 exceeded Rs 10 crore. If not, you don’t need to read any
- TCS is to be paid only as and when the customer pays you the consideration for the goods sold. No TCS is to be paid if the customer does not pay for goods sold (either because of a goods return or a discount or a bad debt for example).
- The TCS is to be collected on receipt of money in excess of an aggregate of Rs. 50 lakhs in a year from sale of goods. This includes whatever was billed for – including GST
- The TCS applies to sale of goods but not to a sale of
- Alternately, if you find it administratively convenient to do so, you may add the TCS to the invoice and pay the TCS as and when invoices are raised rather than waiting for the payment from the Customer. There could be some implementation issues with this route though.
- No TCS to be collected on goods exported outside However for goods sold to a unit in an SEZ/EOU, TCS may still be applicable.
- No TCS on sales to Central Government, State Government, Local Authorities. However TCS will be applicable to Sales to Government Companies /
- TCS to be collected at rate of 075% till March 31, 2021 and after that at rate of 0.1%.
If the Buyer does not have a PAN / Aadhaar then the rate will be 1% after 1.4.2021.
- The TCS for the month is to be paid monthly on or before 7th of next month and to be paid through
- TCS will be on the total sum received including the GST component
- If the transaction is subject to a TDS for any reason then TCS shall not
- Example of TCS computation on the invoice is below:
|GST @ 18%||180,000|
|Invoice value with GST||
|TCS @ 0.075%||885|
If you are Buyer of goods and buy more than Rs. 50 lakhs form a Supplier whose annual sales exceed Rs. 10 Lakhs
- TCS may be collected from you by the seller Please keep track of all such TCS levied on you and have it recorded separately in books like TDS and credit will be available against Income tax liability. TCS to be claimed in the year when it is paid. TCS collected from customers has to be paid separately. Netting off of TCS is not to be
The TCS levy is not very large – on a sale of Rs. 1 crore, the TCS will be 7,500 only – but if not paid then it carried interest as well as penalty.
We recommend as under:
Identify potential customers where the sales exceed Rs. 50 Lakhs in the year or collections exceed Rs. 50 Lakhs.
Align your accounting system to keep track of the amounts received from such customers every month.
Immediately at the end of each month, check the amount so received pay TCS on the amount collected after considering the Rs 50 lakhs limit. The Amount so paid can then be intimated to the Customer by way of a debit note and the same can be recovered.
In case you need to understand this better you may contact either the Audit Manager who handles your Client A/c or Jhanvi/Minal in the tax team.
Team Taxation PKA September 30, 2020