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TCS Changes in Budget 2020

tcs labh software

Table of Contents

What is TCS?

Tax Collected at Source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale.
New TCS provision from 1st October 2020
The Government of India has issued guidelines earlier & further on 29th September 2020 which has entirely changed the Concept of TCS.

Applicability of this Section:
• If Total Turnover Exceeds Rs. 10 crores in Previous Financial Year. (No Change)

Trigger Point of TCS:
• Earlier – Rs. 50 Lakhs of Sale of Goods. (No Change)
• Changed to – Rs. 50 Lakhs of Receipt of Sale Consideration.

So irrespective of Sales, Collection of TCS is triggered when we receive the Sale Consideration (including advance receipts) exceeding Rs. 50 lakhs. (Sale consideration will include GST amount).
Relevance to the period of sales not to be seen. If we have received the sale consideration of any earlier year or period, TCS will be applicable even if the sale was carried out before 1st October, 2020.

Since Trigger point of TCS interpreted based on the reading of Section was “Sale of Goods”, has been shifted to “Receipt of Sale Consideration”. We don’t have to charge TCS on Invoice and Pay TCS based on Invoice date.
For e.g. Even if there is No Sales till Sept’20, but we have received an old outstanding of Rs. 60 lakhs during the period Apr’20 – Sept’20, then after 1st Oct, 2020 sales of Rs. 10 lakhs has been made and the consideration is received before Mar’21 then TCS will be liable on Rs. 10 lakhs. But if the same is received after Apr’21 then again a separate threshold of Rs. 50 lakhs will be available.

Threshold Limit for Applicability of Buyer:
For calculating the threshold limit, the receipt of sale consideration during the entire financial year should be considered.

Adjustment for Sale return and Discount:
No Separate adjustment to be made for Sale return or Discount as TCS is to be collected on ‘Actual Receipt of Sale Consideration’ i.e. net off return/discount.

How to collect TCS at the time of Receipt of Consideration:
As usual Government is not answerable to All Practical Difficulties Businessman will face, so we have to find suitable solutions and implement the same.
We have to make a Monthly Debit Note to the Customers for TCS based on the Payments received during the Month and Pay TCS accordingly.
Note : Guidelines issued by the CBDT shall be binding on the person liable to collect the TCS.

Rate of TCS

Section

Nature of Receipts

Reduced rate from 1st October 2020 to 31st March 2021*

Rate of TCS from 1st April 2021 onwards

206C(1H)

Sale of goods (other than Alcohol, Tendu Leaves, Timber, Forest Produce, Scrap, Coal, Lignite, Iron or a Motor Vehicle)

0.075%*

0.1%

Note: As per Finance Bill 2020, the TCS rate for this category with PAN is 0.1% and No PAN will be 1%. Due to the COVID 19 outbreak, the department has reduced the rate by 25% for PAN holders. Therefore, PAN rate is reduced to 0.075% and No PAN remains as 1%.

Exceptions:
• If the buyer is liable to deduct TDS or collect TCS under any other provision of the Act and has deducted/collected such amount on the goods purchased by him from the seller.
• If the buyer is the Central/State Govt, an embassy, a High Commission, legation, consulate, the trade representation of a foreign state, local authority.
• Any Person importing goods to India or any class of person notified by the Central Govt in the official gazette for the purpose subject to such condition as specified in that notification

How to implement it & pass TCS entry in Tally?

To implement TCS in Tally, click on the link mentioned below –
https://help.tallysolutions.com/article/Tally.ERP9/Tax_India/tcs/tcs-changes-budget-2020.htm

Frequently Asked Questions [FAQ]

The new provision is applicable from 1st October, 2020.

Here, Seller means a person whose Total Sales, Turnover, Gross Receipts from the business being carried out by him in preceding Financial Year exceeds ₹ 10 Crores.
The term turnover has not been specifically defined in the sub-section. In the “Guidance Note on Terms used in Financial Statements” published by ICAI, “the expression “Sales Turnover” has been defined as: “The aggregate amount for which sales are affected or services rendered by an enterprise.
In the statement issued by ICAI on the CARO the word ‘turnover’ has been defined as under- “The term ‘turnover’ for the purposes of this clause may be interpreted to mean the aggregate amount for which sales are effected or services rendered by an enterprise”.

No. New TCS provision is not applicable to service providers.

In the Section 206C(1H), the below goods shall be excluded-

  • Alcoholic Liquor for human consumption
  • Tendu leaves
  • Timber obtained under a forest lease
  • Timber obtained by any mode other than under a forest lease
  • Any other forest produce not being timber or tendu leaves
  • Scrap
  • Minerals, being coal or lignite or iron ore
  • Motor vehicle (if value exceeds INR 10 Lakhs)

No. Goods exported out of India shall be excluded.

If the sales consideration for sales to any single customer during the year exceeds INR 50 Lakhs, the seller will be liable for collecting TCS on the sales / receipts exceeding INR 50 lakhs made to such a customer.

For calculating the threshold limit of ₹ 10 crore in the preceding financial year, section 206C(1H) provides that Total Sales, Turnover, Gross Receipts from the business shall be considered. As such, the receipts of sale of services shall also be considered.

TCS is to be collected on an amount excluding GST.

As per Section 206(1H), TCS is required to be collected at the time of receipt of sales consideration.

The rate of TCS u/s 206C (1H) to be collected shall be 1% of the sales consideration.

  • The TCS can be collected by charging through invoice 
  • The TCS can be collected by charging through a debit note.

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