TCS stands for TAX COLLECTED AT SOURCE. The seller collects tax from the buyer. Here Seller is a collector and the Buyer is collectee. Section 206C governs the collection of taxes from buyers. This provision specifies the rates, method of tax collection and deposition and exception to section 206C.
Before 1st Oct 2020, Category of Goods on which TCS is applicable are specified below. The given table provide the details of goods which are covered under TCS & rates at which TCS will be collected.
| S.No. | Type of Goods | Rate |
| 1 | Alcoholic Liquor for consumption by humans | 1% |
| 2 | Timber wood obtained under forest lease | 2.5% |
| 3 | Timber wood obtained by any other mode than forest lease | 2.5% |
| 4 | Tendu leaves | 5% |
| 5 | Any other forest produces not being Tendu leaves and timber | 2.5% |
| 6 | Scrap | 1% |
| 7 | Minerals like lignite, coal and iron ore | 1% |
| 8 | Parking lot, Toll Plaza and Mining and Quarrying | 2% |
| 9 | Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs | 1% |
| 10 | Purchase of Motor vehicle exceeding Rs. 10 Lakhs | 1% |
Classification of Seller:
For the purpose of the above category of specified goods, Seller shall include only the following mentioned person:
- Central Govt, State Govt,
- Local Authority,
- Company registered under Companies Act,
- Partnership Firms,
- Statutory Corporation,
- Co-operative Society and
- Any person or HUF who is subjected to an audit of accounts under the Income tax act for a particular financial year.
Classification of Buyer:
A buyer is a person, who purchases goods, in any sale, by way of auction, tender, or any other mode. However, the following shall not be included in the buyers’ category:
- Public sector companies
- Central Government
- State Government
- Embassy of High commission
- Consulate
- Other Trade Representation of a Foreign Nation
- A Club such as sports clubs and social clubs
Vide Finance Act 2020, Section 206C(1H) & 206C(1G) is introduced to widen the scope of tax collection.
| S.No. | Type of Goods | Rate |
| 1 | Sales of Goods (Whose sales exceeds Rs. 10 Crores in preceding FY)- Section 206C(1H) | 0.1% |
| 2 | Remittance of Foreign Currency of More than 7 lakhs- Section 206C(1G) | 5% |
| 3 | Overseas Tour Package- Section 206C(1G) | 5% |
Classification of Seller:
- For the purpose of Section 206c(1H), Every person, being a seller, who receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G).
- For the purpose of Section 206C(1G)(a), An Authorized dealer remitting foreign currency outside india.
- For the purpose of Section 206C(1G)(b), Seller of an overseas tour package.
Classification of Buyer:
- For Section 206C(1H), Buyer includes a person who purchases goods but TCS is not to be collected when the sale is made to the Central or State Government or Embassy/High-commission, Consulate or Trade Representative/Local Authority.
- For Section 206C(1G)(a), the Buyer will be the person remitting foreign currency outside of India.
- For Section 206C(IG)(b), the Buyer will be the person buying the overseas tour package.
PAYMENT of TCS:
Due date of Payment of TCS : 7th of the month succeeding the month in which TCS is collected. Seller is liable to deposit the collected tax to Govt.
In case, the seller does not collect Tax or fails to deposit the collected tax, then he will be liable to pay penalty @1% per month or part of month.
Due Dates of Filing Quarterly TCS Return (Form 27EQ):
| Quarter | Due date of Return |
| Apr-Jun | 15 July |
| Jul-Sep | 15 October |
| Oct-Dec | 15 January |
| Jan-Mar | 15 May |
Certificate of TCS:
The person collecting tax at source (Seller) shall provide the buyers with TCS certificate in Form27D. It shall be provided within 15 days from the date of filing TCS quarterly returns.
Exemption:
TCS shall be exempted under the following cases:
- TCS at a lower rate: Under this case, an application shall be made to the Assessing Officer for the collection of tax at a lower rate. The application shall be made under Form 13 and this exemption shall be granted only if the officer is satisfied that the buyer’s total income justifies for lower rate. The officer shall issue a certificate for lower rate of collection.
- Total tax exemption: Under this case, the Buyer needs to furnish a declaration regarding nonapplicability of the provisions relating to TCS. Such declaration shall be made in Form 27C. It is the onus of the buyer to prove that goods are used for the purpose of manufacturing, processing, or production.
(Note: In both the above cases, it is mandatory for a buyer to quote PAN, otherwise exemption will not available to the buyer)
