|Particulars||Section 206C(1H)||Section 194Q||Section 206AB||Section 206CCA|
|Situation||TCS Collection by seller of goods.||TDS deduction on payment for purchase of goods by buyer.||Deduction of tax at source for recipient (specified person) is a non-filer of income tax return.||Collection of tax at source from specified person who is a non-filer of income tax return.|
|Date of Applicability||01st October, 2020||01st July, 2021||01st July, 2021||01st July, 2021|
|Applicability||Seller having turnover/ gross receipts exceeding Rs. 10 crores in the immediately preceding financial year.||Buyer being resident or non-resident having turnover/ gross receipts exceeding Rs. 10 crores in the immediately preceding financial year.||Specified Person means a person who has not filed the return for both the two previous year immediately prior to the year in which tax is required to be deducted, and aggregate amount of TDS/TCS in his case is Rs. 50,000 (or more) in each of these two previous year.||Specified Person means a person who has not filed the return for both the two previous year immediately prior to the year in which tax is required to be collected and aggregate amount of TDS/TCS in his case is Rs. 50,000 (or more) in each of these two previous year.|
|Provision||The seller has to collect TCS @ 0.1% of the sale consideration exceeding Rs. 50 lakh at the time of receipt from buyer.
If PAN is not furnished then TCS rate will be 1%.
|The buyer has to deduct TDS @ 0.1% of the sum exceeding Rs. 50 lakh at the time of credit or at the time of payment, whichever is earlier.||TDS rate will be higher of the twice the normal rate or 5%.||TCS under section 206C will be collected at higher of twice the normal rate or 5%.|
|Exclusion||1. Buyer being a Central government, Local authority or Importer of goods.
2. TDS has been deducted by the buyer u/s 194Q
|Not Applicable if TCS is collected by the seller under 206C except 206C (1H).||TDS deduction under section 192, 192A, 194B, 194BB, 194LBC or 194N.||Specified Person does not include Non-resident who does not have a PE in India.|
The Supreme Court has ruled that payments made by resident Indian end users or distributors (such as technology companies) to overseas suppliers on import of ‘shrink-wrapped’ software generally known as off-the-shelf software- is not a royalty’ payment. Thus, no withholding tax obligation arise in India against such payments.
During assessments payments made for import of shrink-wrapped software to overseas suppliers were held assessable to tax as ‘royalty’ under section 9(1)(vi) of the Income Tax Act and Article 12 of the respective tax treaties. This classification as ‘royalty’ required tax to be deducted at source (TDS) when making payment to the overseas suppliers.
The contention of companies was that the use of software by the Indian importer was limited to making a backup copy and /or redistribution. They did not have the right to modify the shrink-wrapped software that was imported. So, the payment made to overseas supplier could only be treated as business income in the hands of the entity – instead of as ‘royalty’ – and no tax withholding obligation arose.
1. Please advise system to be followed from step one to the end.
Ans. As per Circular no. 17 of 2020 dt. 29th September, 2020, point no. 4.4.2 (iii) – Since the threshold of fifty lakh rupees is with respect to the previous year, calculation of receipt of sale consideration for triggering TCS under sub-section (1H) of section 206C shall be computed from 1st April, 2020. Hence, if a person being seller has already received fifty lakh rupees or more up to 30th September 2020 from a buyer, the TCS under sub-section (1H) of section 206C shall apply on all receipt of sale consideration during the previous year, on or after 1st October 2020, from such buyer.
Following entries to be passed in books of accounts:-
Entry on Sales booking:-
Debtor …………………Dr. 1,18,000
TCS Receivable ……….Dr. 88.50
To Sales 1,00,000
To GST Payable 18,000 (assumed to be @ 18%)
To TCS Payable 88.50 (@ 0.075% of (Sales value including GST) considering abatement of 25% prescribed by Press Release of Central Board of Direct Tax dated 13th May, 2020 which is applicable upto 31/03/2021.)
(As per Circular no. 17 of 2020 dt. 29th September, 2020, point no. 4.6.1 – It is requested to clarify that whether adjustment is required to be made for sales return, discount or indirect taxes including GST for the purpose of collection of tax under sub-section (lH) of section 206C of the Act. It is hereby clarified that no adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under sub-section (IH) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration.)
Entry on Payment received from debtor
Bank ……………Dr. 1,18,088.50
To Debtor 1,18,000
To TCS Receivable 88.50
(As per Circular no. 17 of 2020 dt. 29th September, 2020, point no. 2 – a seller receiving an amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year to collect tax from the buyer a sum equal to 0.1 per cent (subject to the provisions of proposed sub-section (10A) of the section 206C of the Act) of the sale consideration exceeding fifty lakh rupees as income-tax. The collection is required to be made at the time of receipt of amount of sales consideration.)
Entry on Payment of TCS Liability
TCS Payable ……………..Dr. 88.50
To Bank 88.50
(As per Rule 37CA(2) All sums collected in accordance with the provisions of section 206C by collectors other than an office of the Government shall be paid to the credit of the Central Government within one week from the last day of the month in which the collection is made.)
- Do we charge TCS in our Invoicing.
Ans. We have two options.
- Either we charge TCS on the invoice or;
- Raise a debit note for this amount
We need to make sure that the invoice/ Debit note are GST Compliant. It will be less complex if we charge TCS on invoice on the assumption that the amount received, from the buyer is inclusive of TCS and do the reverse calculation for the TCS amount and credit the same to government.
- Is TCS charged on the billing amount before GST or on amount including GST.
Ans. TCS is required to be charged on invoicing amount including GST. Please refer to the clarification in Point no. 4.6.1 of Circular no. 17 of 2020 dated 29th September, 2020.
- Do we deposit TCS based on billing date or after receipt of payment from your customer.
Ans. TCS is to be deposited on receipt of payment from the buyer irrespective whether it is an advance or against an invoice.
(As per Circular no. 17 of 2020 dt. 29th September, 2020, point no. 4.4.2 – Since sub-section (1H) of section 206C of the Act applies on receipt of sale consideration, the provision of this sub-section shall not apply on any sale consideration received before 1st October 2020. Consequently, it would apply on all sale consideration (including advance received for sale) received on or after 1st October 2020 even if the sale was carried out before 1st October 2020.
- If TCS have to be deposited on payment basis, do we deposit TCS on all payments receipt after 01/10/2020 i.e. even including supplies made prior 01/10/2020 and payment received after 01/10/2020.
Ans. Yes, you need to deposit TCS on all payments received after 01/10/2020, even if it relates to supplies before 01/10/2020. This is clarified in circular no. 17 of 2020 dated 29th September, 2020. Please refer to clarification in point no. 4.4.2 of Circular no. 17 of 2020 dated 29th September, 2020 above.
6. We have division of our Company located at different states near customer premises. Do we charge TCS on supply made to our own division. In the Balance Sheet the sale is consider as Stock Transfer and not sale despite the fact that GST bill are raised for movement of goods.
Ans. As per explanation to sub section (1H) of Section 206C (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.
As per Section 2(31) of Income tax act, 1961 “person” includes—
- an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses.
Accordingly, the provision of TCS under section 206C(1H) is not applicable in case of Stock Transfers.
Disclaimer: – Khurana Khurana & Associates LLP shall not be liable for any direct, indirect, incidental, consequential damages, or any loss of profit or revenue whether incurred directly or indirectly. Laws may change with passage of time.
- Entity Details:-
- Name of the entity
- Company Identification Number
- Name of the Entity
- Incorporation/Registration Date
- Full Address (Office)
- Authorised Representative Details
- Mobile No.
- Email Id
- Directors/Partners Details
- Name of the Director
- Mobile No.
- Postal Address
- Email ID
- Information Required
- Has your startup applied for any IPR – Patent, Trademark, Copyright, Design, and Plant Variety along with the application no.
- Is the startup creating an innovative product/service/process or improving an existing product/service/process – Innovation/Improvement
- Brief note supporting the options chosen above for innovation, improvement and scalability.
- Startup Activities
- Any awards/recognition received – Upload Award Document
- What is the problem the startup is solving?
- How does your startup propose to solve this problem?
- What is the uniqueness of your solution?
- How does your startup generate revenue?
- Incorporation/Registration Certificate
- Web Link
- Other supporting presentations
- Certification as to:-
- The startup has not been incorporated for more than 10 years.
- Turnover of the entity of any of the financial years since incorporation has not exceeded one hundred crore rupees.
- The entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation; and
- Has not formed the entity by splitting up or reconstruction of a business already in existence.
- Section 115BAC of the Income-tax Act, 1961 (the Act), inserted by the Finance Act, 2020 w.e.f the assessment year 2021-22, inter alia, provides that a person, being an individual or a Hindu Undivided Family having income other than income from business or profession”, may exercise option in respect of a previous year to be taxed under the said section 115BAC along with his return of income to be furnished under sub-section (1) of section 139 of the Act for each year.
- The concessional rate provided under section 115BAC of the Act is subject to the condition that the total income shall be computed without specified exemption or deduction, setoff of loss and additional depreciation.
- It is clarified that an employee, having income other than the income under the head “profit and gains of business or profession” and intending to opt for the concessional rate under section 115BAC of the Act, may intimate the deductor, being his employer, of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section 115BAC of the Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of section 115BAC of the Act.
- It is also clarified that the intimation so made to the deductor shall be only for the purposes of TDS during the previous year and cannot be modified during that year.
- The intimation would not amount to exercising option in terms of sub-section (S) of section 115BAC of the Act and the person shall be required to do so along with the return to be furnished under sub-section (1) of section 139 of the Act for that previous year.
- Option at the time of filing of return of income under sub-section (1) of section 139 of the Act could be different from the intimation made by such employee to the employer for that previous year.
- In case of a person who has income under the head “profit and gains of business or profession” also, the option for taxation under section 115BAC of the Act once exercised for a previous year at the time of filing of return of income under sub-section (1) of section 139 of the Act cannot be changed for subsequent previous years except in certain circumstances.
The provisions of section 80- IAC, applicable from the assessment year 2017-18, are given below –
- Conditions –
- The assessee is a company or a limited liability partnership (LLP).
- It is engaged in an eligible business. “ Eligible business” means-
A business carried out by an eligible start-up engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation.
- The above company or LLP is incorporated after March 31, 2016 but before April 01, 2021 (i.e., 1/04/2016 to 31/03/2021).
- Annual business turnover of the company or LLP does not exceed Rs.100 crore in the previous year relevant to the assessment year for which deduction is claimed.
- It holds a certificate of eligible business from the Inter-Ministerial Board of Certification. The Inter-Ministerial Board setup by Department of Industrial Policy and Promotion validates Start-up for granting tax related benefits. A DIPP recognized Start-up shall be eligible to apply to the Inter-Ministerial Board for full deduction on the profits and gains from business. An Application to the Inter Ministerial Board is made in FORM 1 along with the document.
- The company or LLP is not formed by splitting up, or the reconstruction, of a business already in existence.
- It is not formed by the transfer to a new business of a machinery or plant previously used for any purpose
- Amount of deduction – if the above conditions are satisfied, 100 percent of the profits and gains derived from such business is deductible for 3 consecutive assessment years. However, this deduction may, at the option of the assessee, be claimed by it for any 3 consecutive assessment years out of 10 years beginning from the year in which the eligible start up is incorporated. Books of account should be audited and audit report should be submitted along with the return of income.