Introduction : In the Finance Act, 2020; it has specified three new provisions in reference to Tax Collection at Source; in this article we will see, to whom provisions are applicable, whether there is any exemption, what will be rate of deduction, and what are the compliance that are required to be carried out by the assessee.
Levy Introduced by the government:
Levy of TCS on sale of any goods (other than specified goods):
Who are the persons that are responsible to collect the TCS?
Any person being seller whose turnover in immediately preceding financial year exceeds Rs. 10 Crores and he has sold the goods to any person during the year and due to which consideration received by him from such person exceeds Rs. 50 Lahks then he is required to collect TCS. (Limit of 50 Lakhs is applicable per buyer)
What will the rate of deduction?
In case where buyer furnishes PAN or Aadhar then rate of deduction will be 0.075% of consideration received, however if it has not been furnished by the buyer, seller will collect TCS at the rate of 0.75%. From financial the rate of deduction will be 1% in case PAN or Aadhar card is not furnished and 0.1% in case were PAN or Aadhar card has been furnished by the buyer.
What are specified goods on which this levy of TCS will not be applicable?
Goods being tendu leaves, liquor, timber, scrape, toll ticket, cars or goods liable to TDS; on this it will not be applicable as this item are already covered under normal levy of TCS i.e. under many different provisions specified for TCS deduction.
Whether there is any specific exemption?
Yes,in case if buyer is liable to deduct TDS under any provision or buyer is Government, Embassy, High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government.
Illustration : Mr. R has turnover of Rs 23 Crore in immediately preceding financial year; during the year he has sold tubes of Rs. 60,00,000/- to Mr. Ganesh; Mr. Ganesh paid the entire amount. Determine whether the TCS levy will be applicable.
In the given case as turnover of Mr. R exceeds the specified limit, also transaction limit is exceeding the specified limit. (It must be noted that both the conditions are cumulative and therefore, for attracting levy it is necessary that both the condition are fulfilled). Further, Mr. Ganesh is not covered under exemption as he is not the person who is exempted (Government, Embassy etc.). The said sale is also not covered under any provision of TCS therefore, Mr. R will be required to deduct the TCS on amount Rs. 10,00,000/- i.e. amount in excess of Rs. 50,00,000/-
What if in the given case product sold is timber?
Then in that case above TCS levy is not applicable as such sale is covered under normal provision of TCS which required to deduct TCS at the rate of 2.5%.
What if such sale has been made to any Government officer?
It is important to note that only transaction with government will be covered under exemption, or transaction with other specified person will be covered under exemption. Therefore, transaction with government officer will not be covered and such will be liable to TCS deduction levy.
Levy of TCS on sale of overseas tour package:
Who is required to collect TCS and What will be rate of TCS?
Any seller of an overseas tour program package who receives any amount from any buyer, i.e. person whopurchases such package, shall be liable to collect TCS at the rate of 5%. However, in case if PAN or Aadhaar is not furnished by such buyer then he will be required to collect TCS at the rate of 10%.
What is the monetary limit after which levy will be applicable?
It is important to note that no monetary limit is prescribed for this transaction, i.e. irrespective of any amount TCS must be collected by seller of such tour package.
Which person are been exempted from levy of TCS?
Yes, in case if buyer is liable to deduct TDS under any provision or buyer is Government, Embassy, High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government.
What is “Overseas tour program package”?
“Overseas tour program package”is proposed to be defined to mean any tour package which offers visit to a country or more than one country or territory or more than one territory outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expense of similar nature or in relation thereto.
Levy of TCS on Foreign Remittance Through Limited Remittance Scheme:
Who is required to collect TCS and What will be rate of TCS?
Whenever any authorized dealer as defined under Foreign Exchange Management Act; receives an amount of Rs 7,00,000/- or more in any financial year from a buyer of foreign currency which (person who will provide Indian rupees in exchange of foreign currency). The rate at which TCS will be collected will be 5% in case PAN or Aadhar is furnished and it will be 10% in case where such has not been furnished.
Which person are been exempted from levy of TCS?
Yes, in case if buyer is liable to deduct TDS under any provision or buyer is Government, Embassy, High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government.
Illustration :
Mr. D being authorized dealer as defined under Foreign Exchange Management Act (FEMA); he has received a request from Mr. J to provide him with $1,00,000; against this he will provide Rs. 6,90,000/- after few days he has again received request from Mr. J to repeat the transaction. Mr. J is of the opinion that TCS will not be levied as transaction amount does not exceeds the given limit. On the contrary Mr. D is of the opinion that TCS will be levied on entire Rs. 13,80,000/- being total of transaction.
In the given case TCS will be applicable as seller is authorized dealer as defined under Foreign Exchange Management Act; receives an amount of Rs 7,00,000/- or more in any financial year from a buyer of foreign currency which (person who will provide Indian rupees in exchange of foreign currency). The contention of Mr. J is invalid because though individual amount is not exceeding but if total amount exceeds the limit of Rs. 7,00,000/- then provision of TCS will be applicable. But contention of Mr. D is also not valid as TCS will be deducted on amount in excess of Rs. 7,00,000/-. The rate at which TCS will be collected will be 5% in case PAN or Aadhar is furnished and it will be 10% in case where such has not been furnished.
Important points:
Every person liable to deduct TCS is required to submit quarterly return and due date for financial year 2020-2021 is
Quarter | Period | Due-date |
1st | April- June | 5th July |
2nd | July- September | 15th October |
3rd | October- December | 15th January |
4th | January- March | 15th May |
Due date for payment of TCS will be 7th of next month in which TCS is required to be deducted