New Provisions additional to the existing provision of Tax Collected at Source under Income-tax Act 1961 - New Provisions Applicable from 01st October 2020.

Introduction - Finance Act, 2020 introduced 3 new provisions under Tax Collected at Source Chapter (“TCS”) in additions to old TCS provisions:

• TCS on foreign remittance through LRS;
• TCS on selling overseas tour packages; and
• TCS on sales of any goods:
• TCS unlike TDS is required to be collected additionally along with consideration for certain transaction;
• That is TCS is required to be collected by the payee;
• Whereas, TDS is required to be deducted on certain payments made by the payer for certain transactions.

1.     1.     TCS ON FOREIGN REMITTANCE THROUGH LRS  

Person Responsible to Collect	Any authorized dealer (“AD”) as defined under FEMA
When the tax should be collected	AD receives an amount an aggregate of the amount of INR 7,00,000 or more in a Financial Years
Form whom the tax should to collected	From a buyer of foreign currency remitting out of India under the LRS
Rate of Collection	Rate of Collection is 5%, In case NO PAN or Adhaar No. rate shall be 10%
Not Applicability in Certain Case	If the buyer is liable to deduct TDS / If a buyer is Government, Embassy or High Commission

 2.     TCS ON SELLING OVERSEAS TOUR PACKAGES

Person Responsible to Collect	Seller of an overseas tour packages and includes expenses for travel, hotel say or boarding or similar expenses
When the tax should be collected	No Monetary limited specified, tax should be collected irrespective of the amount
Form whom the tax should to collected	From any person whom purchases such packages
Rate of Collection	Rate of Collection is 5%, In case NO PAN or Adhaar No. rate shall be 10%
Not Applicability in Certain Case	If the buyer is liable to deduct TDS / If a buyer is Government, Embassy or High Commission

3.     TCS ON SALE OF ANY GOODS

Person Responsible to Collect	Seller whose turnover exceeds INR 10 Crores in the immediately preceding FY
When the tax should be collected	At the time of sales of the products other than tend leaves, liquor, timber, scrape, toll ticket, cars or goods liable to TDS
Form whom the tax should to collected	Value or aggregate value of consideration received exceeds INR 50 Lakhs during the FY
Rate of Collection	Rate of Collection is 0.1%, In case NO PAN or Adhaar No. rate shall be 1%
Not Applicability in Certain Case	If the buyer is liable to deduct TDS / If a buyer is Government, Embassy or High Commission

We have tried to address a few practical aspects in the implementation of the TCS ON SALE OF ANY GOODS provision by way of FAQs:

How to Collect Tax from the buyer?	The seller needs to raise the invoice inclusive of the amount of TCS. However, liability of remittance does not arise until the time when the amount is to be collected
How to determine the applicability of these provision?	The law does not make mandatory to comply continuously once the seller is obliged to follow, which means the applicability needs to be determined on a year to year basis
Whether TCS applicable on sale of property?	Sale of property is covered distinctively under the provision of section 194IA for a value exceeding INR 50 Lakhs
Whether TCS should be refunded in case of sales returns?	No, only primary sales value should be refunded as the amount of TCS would have been credited as prepaid taxes and will appear in Form 26AS of the buyer. However, if the amount has not been settled or net settlement is being made post adjustment of return then on such net consideration TCS should be collected
Whether the consideration will include the amount collected towards GST?	The word consideration is not defined. In terms of section 145A irrespective of the treatment in books of accounts, the value of sales will be inclusive of GST

TCS PAYMENT AND RETURN

• TCS collected needs to be paid within 7 days of the next month.
• Every tax collector shall submit quarterly TCS return i.e., Form 27EQ in respect of the tax collected by him in a particular
• The due date of quarterly return is asunder

Quarter	Due Date
April – June	5th July
July – September	15th October
October – December	15th January
January – March	15th May

 WAY FORWARD AND SCOPE LIMITATION

WAY FORWARD	SCOPE LIMITATION
We shall assist in determining the applicability of the above provision, depending on the nature of business and each business transaction; and	We have not considered the current revised rates as proposed by the government in view of the global pandemic COVID – 19; and
The amount on which the tax should be collected and the amount of remittance for each of the transaction.	However, for the sake of the completion, the rates w.r.t sale of goods have been reduced to 0.075% for buyer having PAN/Aadhar, for current financial year only.

Disclaimer - Please note that the above note is subject to government clarification or changes in law, we have merely discussed the applicability in the current scenario.