Expansion of scope of TCS under section 206C
Effective from: 1st June, 2016
(i) Expansion of scope of TCS under section 206C:
Section 206C(1D) requires collection of tax at source, at the time of receipt of consideration, on cash sale of bullion or jewellery. Tax has to be collected@1% of sale consideration, if such consideration exceeds ` 2 lakh for bullion and ` 5 lakh for jewellery.
The scope of tax collection at source under section 206C has been expanded to provide that every person, being the seller shall, at the time of receipt of consideration, collect tax at the rate of 1% from the purchaser on sale of goods or provision of services specified in column (2) exceeding the corresponding value specified in column (3) :
|
(1) |
(2) |
(3) |
| Section |
Sale / Service Transaction |
Threshold limit |
| 206C(1D | Sale in cash of any goods (other than bullion and jewellery), or providing of any services (other than amounts on which tax is deducted at source by the payer under Chapter XVII-B), consideration for which is received in cash. |
Rs.2 lakhs |
| 206C(1F) | Sale of motor vehicle |
Rs. 10 lakhs |
(ii) Reasons for expansion of scope of section 206C:
(1) To reduce the quantum of cash transaction in sale of any goods and services;
(2) To curb the flow of unaccounted money in the trading system; and
(3) To bring high value transactions within the tax net.
(iii) Requirement to collect tax at source under section 206C(1D) on sale of goods (other than bullion and jewellery) and provision of services not to apply to certain class of buyers fulfilling prescribed conditions:
New sub-section (1E) has been inserted in section 206C to provide that the requirement to collect tax at source under section 206C(1D) in relation to sale of any goods (other than bullion and jewellery) or provision of any service, consideration for which is received in cash, shall not apply to certain class of buyers who fulfil the prescribed conditions.
(iv) Definition of buyer with respect to sections 206C(1D) and 206C(1F):
Consequent to insertion of sub-section (1F) in section 206C, the definition of buyer with respect to section 206C(1D) and 206C(1F) would mean a person who obtains in any sale, good of the nature specified under thereunder.
(v) Definition of seller expanded:
Consequent to expansion of scope of TCS to include transaction of provision of services, the definition of seller under clause (c) of Explanation to section 206C has been amended to include individuals/HUFs whose gross receipts from business or profession exceed the monetary limits specified in section 44AB during the financial year immediately preceding the financial year in which such services are provided.
| Note – These amendments in section 206C have given rise to certain issues relating to the scope and applicability of the provisions. Accordingly, the CBDT has, vide Circular No. 22/2016 dated 8.6.2016 and Circular No.23/2016 dated 24.6.2016, clarified the following issues in “Question & Answer (Q&A)” format.
Q.1 Whether TCS@1% is on sale of motor vehicle at retail level or also on sale of motor vehicles by manufacturers to dealers/ distributors? A. To bring high value transactions within the tax net, section 206C has been amended to provide that the seller shall collect the tax @ 1% from the purchaser on sale of motor vehicle of the value exceeding ` 10 lakhs. This is brought to cover all transactions of retail sales and accordingly, it will not apply on sale of motor vehicles by manufacturers to dealers/distributors.
Q.2 Whether TCS@1% on sale of motor vehicle is applicable only to luxury cars? A. No, as per section 206C(1F), the seller shall collect tax@1% from the purchaser on sale of any motor vehicle of the value exceeding ` 10 lakhs. Q.3 Whether TCS@1% is applicable in the case of sale to Government Departments, Embassies, Consulates and United Nation Institutions, of motor vehicle or any other goods or provision of services? A. Government, institutions notified under United Nations (Privileges and Immunities) Act 1947, and Embassies, Consulates, High Commission, Legation, Commission and trade representation of a foreign State shall not be liable to levy of TCS@1% under sub-section (1D) and (IF) of section 206C.
Q.4 Whether TCS is applicable on each sale of motor vehicle or on aggregate value of sale during the year? A. Tax is to be collected at source@1% on sale consideration of a motor vehicle exceeding ` 10 lakhs. It is applicable to each sale and not to aggregate value of sale made during the year.
Q.5 Whether TCS@1% on sale of motor vehicle is applicable in case of an individual? A. The definition of “Seller” as given in clause (c) of the Explanation below subsection (11) of section 206C shall be applicable in the case of sale of motor vehicles also. Accordingly, an individual who is liable to audit as per the provisions of section 44AB during the financial year immediately preceding the financial year in which the motor vehicle is sold shall be liable for collection of tax at source on sale of motor vehicle by him.
Q.6 How would the provisions of TCS on sale of motor vehicle be applicable in a case where part of the payment is made in cash and part is made by cheque? A. The provisions of TCS on sale of motor vehicle exceeding ` 10 lakhs is not dependent on mode of payment. Any sale of motor vehicle exceeding ` 10 lakhs would attract TCS@1%.
Q.7 As per section 206C(1D), tax is to be collected at source@1% if sale consideration received in cash exceeds ` 2 lakhs whereas as per section 206C(1F), tax is to be collected at source@1% of the sale consideration of a motor vehicle exceeding 10 lakh rupees. Whether TCS will be made under both sub-section (lD) and (IF) of section 206C@2%, where part of the payment for purchase of motor vehicle exceeds ` 2 lakhs in cash? A. Sub-section (1F) section 206C provides for TCS at the rate of 1% on sale of motor vehicle of value exceeding ` 10 lakhs. This is irrespective of the mode of payment. Thus, if the value of motor vehicle is ` 20 lakhs, out of which ` 5 lakhs has been paid in cash and balance amount by way of cheque, the tax shall be collected at source@1% on total sale consideration of ` 20 lakhs only under sub-section (1F) of section 206C. However, if a vehicle is sold for ` 8 lakhs and the consideration is paid in cash, tax shall be collected at source@1% on ` 8 lakhs as per sub-section (1D) of section 206C.
Q.8 Whether tax collection at source@1% under section 206C(1D) will apply in cases where the sale consideration received is partly in cash and partly by cheque and the cash receipt is less than ` 2 lakh? A. No, TCS will not be levied if the cash receipt does not exceed ` 2 lakhs, even if the sale consideration exceeds ` 2 lakhs.
Q.9 Whether tax collection at source under section 206C(1D) will apply only to cash component or in respect of whole of sales consideration? A. Under section 206C(1D), tax is required to be collected at source on the cash component of the sale consideration and not on the whole of the sales consideration. |