What is TCS?

TCS means Tax Collected at Source (TCS). It is a tax collected by the seller when goods are being sold to the buyer. Section 206 of Income Tax Act 1961 governs the goods on which the Seller has to collect tax from the buyer.

Seller whose total sales, gross receipt or turnover from the business carried on by him exceeds Rs.10 crores during the financial year immediately preceding financial year in which sale is carried out, collect from the buyer a sum of equal to 0.1 percent of the sale consideration exceeding Rs.50lakh.

If the buyer has not provided his PAN or Aadhar number to the seller then the seller shall be liable to deduct 1% instead of 5%. Further also provided that if the buyer is liable to deduct tax at source under any other provision of this act on the goods then this provision shall not apply to him.

Buyer means any person who purchase goods but does not include:

  • the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or
  • a local authority as defined in the Explanation to clause (20) of section 10; or.
  • a person importing goods into India or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

seller means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out, not being a person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

By reading above provisions it shall be clear the if the sale consideration exceeds Rs.50lakh TCS should be collected. TCS shall also be applicable for advance received on or after 01st October 2020

(Based on clarification given by CBDT vide Circular No. 17 of 2020 Dated: 29th September, 2020)

The seller deposits the TCS amount in Challan 281 within 7 days from the last day of the month in which the tax was collected.

If the tax collector responsible for collecting the tax and depositing the same to the government does not collect the tax or after collecting doesn’t pay it to the government as per due dates, then he will be liable to pay interest of 1% per month or a part of the month

Every tax collector has to submit quarterly TCS return in respect of the tax collected by him in a particular quarter. The interest on delay in payment of TCS to the government should be paid before filing of the return.

Tax collection at source is exempted in the following cases:

  1. When the eligible goods are used for personal consumption
  2. The purchaser buys the goods for manufacturing, processing or production and not for the purpose of trading of those goods.

TCS under Goods and Service Tax Act

Tax Collected at Source (TCS) under GST means the tax collected by an ecommerce operator from the consideration received by him on behalf of the supplier of goods, or services who makes supplies through operator’s online platform. TCS will be charged as a percentage on the net taxable supplies.

when the e-commerce operators pay the consideration collected to the vendors, they have to deduct an amount as TCS and pay the net amount. In other words, TCS applies only if the operators collect the consideration from the customers on behalf of vendors or suppliers.

The dealers or traders supplying goods and/or services through ecommerce operators will receive payment after deduction of TCS @ 1%.

The tax would have to be deposited to the government by 10th of the next month. All the dealers/traders are required to get registered under GST compulsorily. These provisions are effective from 1st Oct 2018.

Few exceptions to the TCS provisions for the services provided by an ecommerce platform:

  • Hotel accommodation/clubs (unregistered suppliers).
  • Transportation of passengers – radio taxi, motor cab or motorcycle.
  • Housekeeping services like plumbing, carpentry etc. (unregistered suppliers).


What is the new provision?

The Finance Act 2000 inserted a new sub-section (1H) in section 206C of the Income Tax Act 1961. Which will come effect from 1st October 2020.

The amendment states that any seller whose turnover in immediately preceding financial year exceeds Rs.10Cr is liable to collect TCS @0.1% (0.75% up-to 31st March 2021) w.e.f 1st October 2020

On the sale value exceeds Rs.50 lac for each buyer. Such TCS shall be collected only on receipt basis.

Further provided that if the buyer does not give his PAN or Aadhar No. to the supplier. TCS will be collected 1% instead of 0.1%.

Read more at Non-compliance provisions & Penalty Chart related to continuous disclosures

Read more at Auto-population of E-invoice Details into GSTR-1

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