CA Pooja Madhan

The Income Tax Department has mandated the tax to be collected at source on certain transactions at the at a certain specified rate.The provisions of the tax collected at source are governed by section 206C of the Income Tax Act.

The TCS provision mandates the tax to be collected at source at the time of sale of certain specified goods from the buyer at the time of sale.

Now we will discuss the goods on which the tax is to be collected at source and the rates for the different products.

  1. Alchoholic liquire made for human consumption the tax is to be deducted @ 1%
  2. Timber Wood under a forest leased the tax is to be deducted @ 2.5%
  3. Timber wood other than forest leased the tax is to be deducted @ 2.5%
  4. Tendu Leaves the tax is to be deducted @ 5%
  5. Forest produce other than tendu leaves and timber the tax is to be deducted @ 2.5%
  6. Scrap the tax is to be deducted @ 1%
  7. Minerals like ignite, coal and iron ore the tax is to be deducted @ 1%
  8. Bullion exceeding value of Rs. 2 lakhs the tax is to be deducted @ 1%
  9. Jewellery exceeding value of Rs. 5 lakhs the tax is to be deducted @ 1%
  10. Purchase of Motor Vehicle exceeding Rs. 10 lakhs the tax is to be deducted @ 1%
  11. Parking lot, toll plaza, mining and quarrying the tax is to be deducted @ 2%

This is to be noted here the above mentioned goods if used for the purpose of resale or trading then the tax will be collected at source if the same goods are sold for the manufacturing, processing or producing things no tax is to be collected.

Definition of sellers and buyers for the purpose of Tax Collected at Source.

Below mentioned are the persons and organizations which are classified as sellers for the purpose of tax deducted at source, no sellers other than those mentioned below are required to comply with the provisions of the tax collected at source:

  1. Central Government
  2. State Government
  3. Local Authority
  4. Statutory Corporation or Authority
  5. Companies registered under Companies act
  6. Partnership Firms
  7. Co-operative Societies
  8. Any person or individual who is required to get its accounts audited under income tax act for a particular financial year.

In the same way the following classes of buyers are required to comply with the provisions of the tax collected at source

  1. Central Government
  2. State Government
  3. Public Sector Companies
  4. Embassy of high commission
  5. Consulate and other Trade Representation of a Foreign Nation
  6. Clubs such as sports clubs and social clubs

Exemptions under TCS provisions

Following transactions are exempt from the provisions of TCS

  1. When the specified goods are used for personal consumption
  2. When the buyer purchases the goods for the purpose of manufacturing, processing and producing.

TCS under GST

The followng will be the impact of TCS on GST

  1. Every dealer selling the goods online will get the amount from online payment gateway after the deduction of tax at 1% under IGST (0.5% CGST & 0.5% SGST)
  2. The tax deducted will required to be deposited withe goverment by 10th of the next month
  3. All the dealer are required to get themselves registered under GST compulsorily.
  4. These provisions have been made effective from 1st October, 2018