Practical Examples Of TCS

1. If the amount “received” in relation to your sale from one buyer is Rs. 5 crores from 1st
April 2020 to 30th September 2020 but out of this you have to supply Rs.2 crores goods now
after 1st of October. It means that you have received Rs.2 Crores as advance before 1 st Oct.
2020 and the supply for the same is to be made after 1st, Oct. 2020.
In this situation you do not have to collect any TCS on it now though you have to supply the
goods on or after 1 st. Oct. 2020 as it is a receipts-based tax and if it is applicable 1 October
2020 and you are not going to receive any amount on or after 1st. Oct. 2020.
2. You have made a sale of Rs. 5 crores from 1 April 2020 to 30 September 2020 to one buyer out of
which Rs. 4.00 crores were received till 30 September and payment of Rs.1.00 crore was received on
or after 1st. October 2020, even then you have to collect TCS on Rs. 1.00 Crore though no supply is
made on or after 1st. Oct. 2020   because it is a tax based on receipt of payment and you are getting
Rs.1.00 crore on or after October 1, 2020.

3. If you have made the sale of Rs. 60.00 lakhs to any one dealer between 1 April 2020 to 30
September 2020 and out of this Rs 45.00 lakhs are received up to 30 September 2020 and Rs 10.00
lakhs are received on 2 October 2020, then you have to collect the TCS on Rs. 5.00 Lakhs only out of
this receipt because this tax is to be levied on the recovery of more than Rs. 50.00 lakhs in the whole
year and in this case the total recovery is Rs. 55.00 lakhs, then TCS is to be paid on the amount
exceeding Rs. 50.00 Lakhs. Since this provision is applicable only on the excess of receipt over Rs. 50
Lakhs.

4. In order to find the Limit of Rs. 50 lakhs all the amount received from 1 April 2020 will be
counted as this limit is based on the whole financial year but TCS is to be collected on the
amount which you receive on or after 1 October 2020 since the provision is applicable from
1st. Oct. 2020. Let us try to understand this point also. If your receipt is Rs.50 Lakhs before
30th September, then TCS will have to be collected on every amount received by you on or
after 1st October 2020 because your annual limit of Rs.50 Lakhs was completed by 30th
September 2020. Now on October 1 2020, if you collect only 5 lakh rupees, then you have to
collect and deposit TCS on it, because you have completed your collection limit of Rs.50.00
lakh in this financial year already before 30th 2020.
5. You do not need to divide whatever amount is received after 30th September, which bill
it is related to, or whether the payment is related to a supply which is made before 30th
September 2020 or after. This provision has been made in such a way that if you have to
collect and deposit this TCS from a buyer, then you have to collet it on your receipts on or
after 1st. Oct. 2020 and this is receipt based tax and  you have to get all the amount received
after 30th September without seeing when the goods for which payment is received is sold.
Here the amount of sales is not important, but the amount received in that regard is
important for collection and deposit of TCS.
Important Matters Connected With TCS

1. Is There Any Exceptions Available from This TCS Under This Section?
Yes, if this amount has been received in connection with this sale, then the provisions of TCS
will not apply on the
following: –
i. Goods sold during export.
ii. If the buyer is Central Government, State Government, Embassy of any other country etc.,
local bodies like – Municipality etc., any person who is importing goods into India- These are
excluded from the definition of Buyer.
Remember that all the purchases made by them are exempt from this TCS but on the sale
made by them, it if applicable, they have to be collected and deposited TCS from the buyers.
iii. Goods which are already under TCS provisions like Tendu leaves, liquor for human
consumption, scraps etc. In this regard, see the previously applicable TCS provision in the
Income Tax Act, 1961. These goods will be governed by the existing provisions of TCS and
new TCS provision will not be applicable on these goods.
iv. Importers in India – These are excluded from the definition of buyer.
v. If the Government notifies anyone who is to be excluded from the definition of buyer. Till
today no such notification has not been issued by the Government.

2. No TCS On Receipts Before 1st. Oct. 2020

TCS shall be applicable only on the amount received on or after 1st October 2020.
For example, a seller who has received Rs. 1 crore before 1st October 2020 from a
particular buyer and receives Rs. 5 lakhs after 1st October, 2020 would be required
to collect tax on Rs. 5 lakhs only and not on Rs. 55 lakhs [i.e. Rs.1.05 crore – Rs. 50
lakh (threshold)] by including the amount received before 1st October 2020.
3. Bill to Bill Bifurcation Of Receipts Is Not Required
Further, the seller in most of the cases maintains running account of the buyer in
which payments are generally not linked with a particular sale invoice. Therefore, in
order to simplify and ease the compliance of the collector, it may be noted that this
TCS provision shall be applicable on the amount of all sale consideration received on
or after 1st October, 2020 without making any adjustment for the amount received
in respect of sales made before 1st October, 2020. Mandating the collector to
identify and exclude the amount in respect of sales made up to 30th September
2020 from the amount received on or after the 1st of October, 2020 would have
resulted into undue compliance burden for the collector and also litigation.
4. When To Deposit TCS After Collecting It From The Buyers?
 The responsibility for payment of TCS will be on receipt of payment from the buyer
and you have to deposit it to the government on the 7th day of the end of the month
in which you receive the payment. For example, if you receive payment in October
2020, then you have to pay its TCS by 7 November 2020.

Section 206C(1H) Of Income Tax Act, 1961

Every person, being a seller, who receives any amount as consideration for 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) shall, at
the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale
consideration exceeding fifty lakh rupees as income-tax:
Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to
the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the
words “five per cent”, the words “one per cent” had been substituted:
Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax
at source under any other provision of this Act on the goods purchased by him from the seller and has
deducted such amount.
Explanation.—For the purposes of this sub-section,—
(a)  “buyer” means a person who purchases any goods, but does not include,—
(A) the Central Government, a State Government, an embassy, a High Commission, legation,
commission, consulate and the trade representation of a foreign State; or
(B) a local authority as defined in the Explanation to clause (20) of section 10; or
(C) 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;
(b) “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.