TCS on Sale of Goods Over Rs. 50 Lakh with Example
- Rajesh Kumar Kar
- Apr 15
- 8 min read
To broaden the scope of tax collection, the Tax Collected at Source (TCS) laws were implemented. In this case, the vendor raises the cost of the recommended items and services by a specific proportion. The Tax Collected at Source is the exaggerated sum. The TCS is available to the buyer as a credit after the seller makes the required disclosures and deposits the tax amount collected with the government. You can use this credit to settle your income tax obligations. It should be mentioned that goods do not include exports or products covered by section 206C(1)-TCS on the sale of alcohol, tendu leaves, forest fruit, and junk; section 206C(1F)-TCS on the sale of motor vehicles; or section 206C(1G)-TCS on overseas remittances. In this article, we will explain TCS on the sale of goods over Rs. 50 lakh.
Table of Contents
TCS Applicability on Sale of Goods
The type of commodities sold, the turnover or gross receipts from sales, and the type of transaction all influence whether TCS is applicable to a given sale. For the TCS on sale of goods provisions to be applicable, the following conditions must be fulfilled:
The vendor offers goods like automobiles, lumber, junk, and international remittances in addition to goods meant for export.
The seller's business must have generated more than Rs. 10 crores in revenue, gross collections, and turnover during the preceding fiscal year.
The buyer's entire selling consideration for the things they bought must be more than Rs. 50 lakhs.
Goods and Services that Require TCS
Intrastate supplies: TCS is 1% (0.5% CGST + 0.5% SGST) on sales of products or services made via e-commerce platforms within the same state. In such transactions, providers are required to collect this tax from buyers and remit it to the government.
Interstate supplies: The levy is 1% for products and services that are sold across state lines via e-commerce websites. The buyer pays the seller the tax, which the seller then sends to the government. TCS will provide sellers of goods and services with the assurance that compliances will be adhered to through an e-commerce platform.
Product sales made via e-commerce platforms are subject to TCS, which is levied at a rate of 0.1% on total sales over Rs. 50 lakhs and 1% if the customer fails to provide a PAN or Aadhaar number. The mechanism's goals are to control the sale of goods via digital channels, collect taxes that are already due on these supplies and deposit them to the government, and require the buyer of goods purchased through these platforms to provide his PAN or Aadhaar, if he hasn't already, in order to keep track of these transactions.
E-commerce aggregator services: TCS covers e-commerce businesses that offer cloud kitchens or meal delivery, unless the partner restaurant charges more than Rs. 7,500 per day for lodging. This promotes tax compliance and revenue creation by guaranteeing that taxes owed on services rendered through e-commerce platforms are appropriately collected and sent to the government in accordance with legal requirements.
Motor vehicles used for passenger transportation: TCS covers services offered by platforms (aggregators), such as taxis or cab aggregators, but not exclusively. In addition to assisting with tax submission and compliance measures in the transportation sector, TCS guarantees that tax is collected at the source from any transaction involving a passenger transport motor vehicle.
Amount Received for Sale of Goods
TCS on sales is the tax that the seller collects from the buyer at the time of the sale, whereas TCS on purchases is the tax that the seller collects from the buyer at the time of the sale. In the current financial year, any sellers whose total sales, gross receipts, or business turnover above Rs. 10 crores in the preceding fiscal year will be required to adhere to the new TCS regulations. When the amount of sale consideration received for ANY products sold (excluding exports) exceeds Rs. 50 lakhs, the seller will be required to collect tax as TCS from the buyer at a rate of 0.1%. This indicates that TCS applies to sale considerations exceeding Rs. 50,000,000. The tax will be collected as TCS at a rate of 1% if the buyer does not supply their PAN or Aadhaar information. Only amounts received on or after October 1, 2020, will be subject to TCS.
Illustration
Company A made Rs. 15 crores in revenue during the 2019–20 fiscal year by selling goods. Therefore, in the fiscal year 2020–21 company A will be subject to the new TCS regulations. The tax must be collected based on the selling considerations received (from a single buyer) during the year.
Invoice number | Sale consideration received | Date of receipt | Cumulative sales in the year | TCS applicability |
1 | Rs. 2,00,000 | 4 April 2020 | Rs. 2,00,000 | NA |
2 | Rs. 12,00,000 | 25 May 2020 | Rs. 14,00,000 | NA |
3 | Rs. 19,00,000 | 15 September 2020 | Rs. 33,00,000 | NA |
4 | Rs. 25,00,000 | 16 September 2020 | Rs. 58,00,000 | NA |
5 | Rs. 13,00,000 | 15 October 2020 | Rs. 71,00,000 | Applicable - Tax will have to be collected as TCS on Rs. 13,00,000 (Amount received on/ after 1 October 2020 - Sale consideration received from buyer is more than Rs. 50 lakhs in the FY). |
The annual amount of consideration is the basis for the Rs. 50 lakhs criterion. Only the receipts from the start of the fiscal year (1 April 2020) will be taken into account for the computation of TCS on the sale of products that meet the threshold in this fiscal year.
TCS on Sale of Goods Over Rs. 50 Lakh with Example
Since October 1, 2020, Section 206C(1H) has been in effect. Any seller of commodities who gets paid for products worth more than INR 50 lakhs is qualified to receive TCS for the sale of goods. The TCS rate on the sale of products is set by the government. The TCS rate on product sales is now 0.1%.
Example
Assume that during a fiscal year, the seller, Mr. A, receives Rs. 70 lakh. In this case, he will deduct TCS from Rs. 20 lakh (Rs. 70 lakh minus Rs. 50 lakh). Additionally, let's say that Mr. B, the supplier, charged TCS-
The net value of the goods = Rs. 60,00,000
18% GST= Rs. 10,80,000.
The total amount = Rs. (60,00,000 + 10,80,000) = Rs. 70,80,000
TCS on this amount = Rs. (0.1% x 70,80,000) = Rs. 7,080
Value of the final invoice = (70,80,000 + 7,080) = Rs. 7,087,080
Notable Provisions of the New TCS Regulations
GST will not be included in the tax collected as TCS. The TCS regulations will not apply if the buyer deducts tax from the products as TDS. This implies that when tax is withheld at the source, no tax will need to be collected as TCS. Goods that are now under TCS's jurisdiction will not be covered by these new regulations. These clauses will not apply if the customer is importing products into India. Taxes will not be collected if the buyer is the Central or State Government, a local government, or someone comparable. On the invoice, the seller's collected tax must be identified as TCS.
TCS is payable on all sale considerations received from 1 October 2020 (for financial 2020–21) if sales of any business house have already been above Rs. 50,00,000 (calculated up to 30 September 2020), as these provisions go into effect on that date. The buyer will be eligible to receive the extra amount as a refund along with interest if the available TCS credit exceeds the tax liability.
Impact of GST Provisions on E-invoicing
E-invoicing was implemented gradually by the Indian government. Any business-to-business invoice must be reported on the government website due to e-invoicing. Reducing tax evasion is the ultimate goal. The government covered all organizations with a turnover of more than Rs. 50 crore since April 1, 2021, during the third phase. Companies with an annual turnover of more than Rs. 20 crore in any previous years between FY 2017–18 and FY 2021–22 were included in the fourth phase.
According to the current e-invoicing regulation, Section 206C(IH) does not have a specific TCS clause. The TCS that applies to your invoice value under "other charges" must be included when you generate your invoice reference number. Additionally, the TCS amount included in the value of your invoice will be immediately added to the GSTR-1. This new TCS provision operates based on receipts. Sellers must therefore collect this tax on any advance payments that are received. It will then be modified in accordance with the pertinent invoice. The e-invoicing won't be affected if your invoice doesn't include the TCS.
Conclusion
When a seller's gross receipts or total sales for the previous fiscal year exceed Rs. 10 crore, Section 206C(IH) requires them to collect taxes. In this instance, be ready for a TCS deduction if the items you're buying cost more than Rs. 50 lakh. It will help the government monitor high-value transactions and fight tax evasion, but it is also expected to increase sellers' compliance duties and affect buyers' purchasing decisions. Both buyers and sellers must understand and adhere to the requirements in this area in order to avoid penalties or legal ramifications.
FAQ
Q1. What is TCS on the sale of goods?
Section 206C of the Income-tax Act governs the things that are subject to the seller collecting taxes from buyers. These people must get a Tax Collection Account Number in order to collect TCS. For instance, if a box of chocolates costs Rs. 100, the buyer pays Rs. 20, which is the tax collected at the point of sale.
Q2. Should the GST amount be considered for calculating TCS?
According to CBDT Circular No. 17 of 2020, indirect taxes or discounts should not be taken into account for calculating TCS since tax is withheld upon receipt of consideration rather than the sale.
Q3. How much is the TCS on sale of goods above Rs. 50 lakhs?
The buyer will serve as the basis for figuring out the TCS. The threshold limit under Section 206C(1H) is Rs. 50 lakh in a financial year. Therefore, you must collect at a rate of 0.1% on amounts beyond Rs 50 lakh.
Q4. Do TCS provisions cover the supply of services?
The Income Tax Act of 1961 addresses TCS on the sale of goods in Section 206C(IH). Payments for the provision of services are therefore not covered. Nevertheless, it takes into account the selling of services for determining the Rs. 1,00,00,000 barrier.
Q5. What is the TCS applicable to foreign tours?
Anybody who sells a package of international travel must collect a 5% tax from the buyer. The costs of travel, lodging, and any associated expenses will be included in this. With the TCS limit, tax is collected regardless of the amount involved. This action will supplement the income tax return's disclosure of international travel expenses. Filers must include the amount spent (above INR 2 lakhs) on international travel on the new income tax returns.
Q6. Is there any due date for the deposition of TCS?
On the seventh day following the end of the month, a supplier is paid. Every quarter, all TCS collectors are required to submit a TCS return using Form 27EQ. It includes information about the taxes collected in a given quarter.
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