Tax collected at source on cash sale ( TCS on cash sale) under section 206C is effective from 1st June, 2016. Here are the most important points related to TCS you should consider while doing sale or purchase transactions.
Meaning of TCS on cash sale: ( Section 206C)
TCS is covered under section 206C of income tax act,1961
TCS is short form of tax collection at source
A sum equal to the statutory percentage of purchase price is collected by the seller/collector from buyer/lessee/payee.Every person,being seller,shall collect tax at source from the buyer of goods specified in section 206C (1).
The point of collection of tax at source by the seller is at the time of debiting of the amount payable by the buyer to the account of the buyer ,or at the time of receipt of such amount from the said buyer,whichever is earlier.
TCS Percentage for different items :
The statutory percentage prescribed for charging TCS for different items are follows:
Nature of goods percentage rate of TCS applicable
A1 Alcholic liquor for human consumption 1 (other than indian made foreign liquor)
A2 Indian made foreign liquor 1
A3 Tendu leaves 5
A4 Timber obtained under a forest lease 2.5
A5 Timber obtained by any mode other than 2.5 under a forest lease
A6 Any other forest produce not being timber or tendu leaves 2.5
A7 Scrap 1
A8 Minerals,being coal or lignite or iron ore 1
B1 Parking lot,tall plaza,mining and quarrying (other than mining and quarrying of mineral oil,petroleum and natural gas)
C2 Goods and services
C3 Motor vehicle 1
of the value exceeding Rs.10 lakh
Note:In category C,TCS is collected if , sale consideration of bullion [excluding(upto May 31,2013) any coin/ article weighing 10 grams or less ] exceeds Rs. 2,00,000 or sale consideration of jewelry exceeds Rs. 5,00,000 as well as out of sale consideration any amount i.e whole or part of consideration is received in cash tcs will be attracted and seller will collect tax at the rate of 1% of sale consideration.
With effect from June 1, 2016 due to the effect of budget 2016,TCS is also attracted ,if TDS provisions are not applicable and sales consideration of any good and services exceeds Rs 2,00,000 and motor vehicles of value exceeding Rs.10,00,000 and any part of consideration is paid in cash,tcs has to be collected by seller from buyer
The important points on TCS on cash sale with effect from June 1st,2016 are as follows:
- Section 206 C is on the statute of the books since a long time.The introduction of this section is highly significant as it was effective to curb tax evasions and black money transactions.Thus, it seems to b quite helpful to government as it upheld in increase of tax revenues.Thus, considering the favorable effects in terms of high revenue collection,with effect from June 1,2016 the government has extended the scope of this section to cover a wide variety of transactions which were leading to tax evasions.So,in order to have a full stop on tax evasions Nd black money transactions government has which could affect a large number of customers. Hence,tcs will be levied if part or whole consideration is received as cash for good and services worth Rs.2,00,000 and motor vehicles exceeding worth Rs.10,00,000
- More accountability and to have a check on black money transactions is a deadly combination which can be achieved by the introduction of new amendment.Prior to this amendment,transactions involving the cash amount of Rs.2,00,000 out of the consideration amount were very regular but were unnoticed due to low amount transaction but altogether revenue department has to face a heavy revenue loss,so with the coverage of such transactions,there is more accountability.
- The provisions of section 206C is only applicable in the case if the provisions of TDS are not attracted.This has been made clear by statue so that tax payer is not be shouldered by heavy burden of taxes due to double taxation.
- In case of goods and services the provisions of tcs are attracted.The tax is charged by the seller from buyer if consideration is received for sale of any goods or provision of services exceeding Rs.2,00,000 and out of the consideration any part is partially paid in cash and rest by cheque or fully paid in cash,then the buyer has to pay tax at the rate of 1% to the seller.The tax is in addition to sales price.
- The transaction of selling of a motor vehicle of value exceeding Rs.10,00,000 has also been brought within its ambit. Similarly,as in the case of goods and services ,consideration received by the seller of the motor vehicle is received and out of it Rs.2,00,000 is either partially or wholly paid in the cash then the buyer of motor vehicle has also to pay tax @ 1% in addition to its sale price.Car dealers across the country are mandated to collect the tcs and then remit it to government.
- This has been clarified by the CBDT, that this tax is valid on all kind of motor vehicles,which includes premium category two wheeler also.It includes high end motorcycles,motor cars,SUVs,trucks and buses.This is to be noted that even second hand sales are also included under this provision if sale value exceeds Rs.10,00,000.
- The provision introduced in reference to motor vehicles includes the business that sell goods or provide services,but it includes all type of sellers.The scope of this provision even extends to a salaried employee,vehicle manufacturer selling vehicles to dealers,and a dealer selling those vehicles to customers are bound to collect TCS by law if they sell motor vehicle for more than Rs 10,00,000.
- There certain exceptions of buyers in reference to the provision of motor vehicles.The exceptional buyers which are not subject to TCS are as follows,government departments,public sector undertakings,clubs and some other are excluded.These are the exceptional buyers as transactions between these parties can not lead to spike of black money or as tax evasion transactions.The retail buyer of car,buying for his personal use is also within the ambit of exclusion in reference to the section of motor vehicle.
- However,in reference to provisions of goods and services,the scope of section extends to all consumers whether they incur the amount of Rs.2,00,000 for their personal expenditure as ultimate customer for personal uses,they will be attracted towards the provision of TCS and will have to pay tax @ 1% to seller in addition to sale price.Perhaps this seems to be a burden on general public.
- The extension of this section for sure will bring more transparency as when the buyer will be liable to pay TCS ,then it will be mandatory for them to mention their pan number both in the case of motor vehicles and sale of goods and services.The rules from April 2016 onward has mandated the seller to file a statement giving details of persons from whom cash exceeding Rs.2,00,000 has been received for sale of goods and services, he is liable for audit under income tax law.The details will be readily available,hence increasing transparency in transactions.
- The tax authorities have been tough in regard of cross checking the transactions as they want to be doubly sure that government get the details of cash transactions required by them as they have made compulsory to file TCS returns by sellers as well as the information statements pertain to the transactions.Definitely,it is a burdensome process for public but for the long run,it will bring more transparency and huge revenue collection by the department.
TCS on cash sale is one more step to curb black money. Lets see how effective it will be. Dont forget to share this article on facebook to say thanks to author.