NEW TCS FROM BUYERS OF GOODS W.E.F. 01102020 – request to honourable PM and FM to defer new TCS provisions.

[DEV KUMAR KOTHARI]

The FA 2020 inserted new provisions for extending scope of Tax collection at source (TCS) which will come into force from 01102020. The relevant provisions are found in S. 206C. In this write-up only one of such new provision relating to TCS from buyers of any goods, is discussed below:

 Applicability to sellers:

 The provision will apply to a seller  of goods whose turnover during immediately preceding year was more than  ₹ 10 crore. For example , the first time application of the provision is  in current year (FY 2020-21)   and it will cover those sellers of goods whose turnover during FY 2019-20 was more than ₹ 10 crore.

Buyers to whom apply:  any buyer to whom sale of any goods above ₹ 50 lakhs takes place in FY 2020-21 or any subsequent FY.

This amount will not include   exports of goods and other sales which are covered by other provision of TDS or TCS by the buyer.

Buyer will not include exempted categories  of buyers  as per definition of buyer.

However, sales to such exempted buyers will be included in turnover for determining obligation to collect tax that is in limit of  turnover of ₹ 10 crore.

Rate of TCS is 0.1 per cent. In case the buyer does not provide his PAN or ADDHAR number with copy of related card, the TCS will be @ 1%.

Gray areas:

Whether, turnover of first half of FY 2020-21 will be included in total sums of ₹ 10 crore and ₹ 50 Lakh while applying the new provision?

As per logical view, this should not be included because provision is coming into force w.e.f. 01.10.2020 and cannot be be applied in a manner so as to give retrospective effect. However, provisions can be interpreted differently so there is ambiguity.

Whether GST will be included in such sums?

As per logical view this should not be included for the reason that GST is not sale but a sum collected for onward payment to revenue, there is overriding obligation.

 However, provisions can be interpreted differently so there is ambiguity.

Whether, payments received in respect of sales of goods prior to 01.10.2020 (including for first half of FY 2020-21 and also any earlier previous year) will be subject to TCS?

As per reading of  new provisions, yes, because TCS is related to sums received.

Difficulties in implementation:

In this case of TCS, goods are sold by seller. There is no TCS on amount of goods sold, if that was case, simultaneously with raising of bill a debit note could be issued for amount of TCS  which buyer would pay.

The TCS is to be in respect of sums paid by buyer so question is how seller can collect and pay the amount of TCS. This poses a  financial and administrative difficulty.

As per provisions, the Board can remove difficulties. However, as per information available no notification has been issued so far.

This is a fit case to defer the provision to next fiscal year. In fact the provision is counter productive for revenue so it should be omitted forever.

A request email sent by author on 20.09.2020,  to honorable PM sir and FM madam is reproduced below:

Respected PM Sir and Fm madam,

In view of difficulties posed by COVID 19 and resultant partial working, I request and suggest your good selves to defer the new provisions of TCS which will come into effect from 01.10.2020- that is after first half of FY 2020-21 is over.

This will not make any difference on revenue collection because taxpayers will pay advance tax without considering TCS.

Besides, new provisions are not clear on many issues, and it is not the right time to impose more uncertainties on people buying goods exceeding ₹ 50 lakh in FY 2020-21 from a single supplier and imposing duty on the supplier to collect tax in respect of payments made by the supplier.

Even otherwise a person buying goods exceeding ₹ 50 lakh from any supplier singly, is likely to have PAN and pay his tax payable including by way of instalments of advance tax.

Therefore this provision of S.206C (1H) deserves to be omitted at all.

In fact, more reliance on advance tax instead of TDS and TCS will be advantageous for revenue collection in an easy manner, particularly from people who are holding PAN and are regularly filing ITR.

Kindly consider the suggestion to make business easy.

                                                             

Discussions to this article

[Ganeshan Kalyani]

I agree with your views. In fact the 0.075% up to March, 2021 and 0.1% thereafter is so minimal that the supplier will only end up complying more. TCS to be either charged on consideration or for administrative convenience one may charge on the Invoice also. He has to make payment to Govt. and file quarterly return and then he has to issue the certificate. So much of complinance involved. It can be scrapped or as you suggest the advance tax is the correct and easiest avenue to increase revenue.