TCS on sale of goods- Circular 17/2020 dated 29-09-2020 with clarifications

Union Budget, 2020 expanded the scope of collection of tax at source (TCS) to cover any domestic sale of goods. Sellers are required to collect tax @ 0.1% on receipt of sale consideration exceeding INR 50 lakhs during the financial year from a person.

Multiple representations were made seeking clarification on the ambiguities in the TCS provisions and Central Board of Direct Taxes (CBDT) vide its circular dated 29th September 2020 and the press release dated 30th September 2020 has addressed some of them. The circular may necessitate changes in ERP system and could be overwhelming given that TCS provisions are in effect from 1 October 2020.

The clarifications brought by the circular dated 29.09.2020 are as follows:

• In computing INR 50 Lakh threshold per financial year, sales made until September 30, 2020 should also be included as the threshold is across the financial year.
• TCS would be applicable on collections after October 01, 2020 even if the sale was made before the cut-off date
• TCS would be applicable on collection of sale consideration without adjustment for discounts, sales returns, taxes.
• TCS under section 206C(1H) are not applicable to transactions in securities/ commodities (traded through recognised stock exchanges) and to transactions in electricity, renewable energy certificates traded through registered power exchanges.
• The expanded TCS provisions would be applicable for B2B transactions, while the existing TCS provisions on sale of motor vehicles would be applicable on B2C transactions. Interestingly, it has been clarified that in a B2C transaction if the value of a single motor vehicle is less than INR 10L, then the expanded definition could still become applicable.

The note we circulated earlier has been updated with the above changes and the same is attached herewith. You may please refer this note where the recent clarification is highlighted in blue for your easy reference.

 

Please click here to access the updated note: Note on TCS on sale of goods- updated