TCS under Section 206C(1H) on e-Invoicing

What is the new TCS provision U/S 206C(1H) of the Income Tax Act?

The government introduced Section 206C 1H through the Finance Act 2020 to expand TCS provisions to sellers of goods. Sellers with an annual turnover exceeding ₹10 crore must collect tax when receiving more than ₹50 lakh from a single buyer in a financial year. TCS is collected at the time of payment.

Key points to remember:

• This applies to sellers with a gross turnover exceeding ₹10 crore in the previous financial year.
• Exclusions include exports and goods covered under sections 206C(1), 206C(1F), and 206C(1G).
• TCS is not required for government entities, embassies, or foreign trade representations.
• If the buyer is subject to TDS on the same transaction, TCS is not necessary.
• This provision does not apply to imported goods.

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Applicability and Non-Applicability of TCS on Sale of Goods

Applicability: The provisions of Tax Collected at Source (TCS) on the sale of goods, as outlined in Section 206C 1H of the Income Tax Act, are applicable when the following conditions are met:

• Nature of Goods: The seller is engaged in the sale of any goods other than export goods, tendu leaves, alcoholic liquor, timber, scrap, motor vehicles, or foreign remittances.
• Annual Turnover: The total sales, gross receipts, or turnover from the business of the seller should exceed ₹10 crore in the immediately preceding financial year.
• Sale Value: The value or aggregate value of sale consideration for goods received from a single buyer during a financial year is more than ₹50 lakh.

Non-Applicability:

The TCS on Sale of Goods provisions are not applicable under the following circumstances:

1. Annual Turnover: The total sales, gross receipts, or turnover from the business of the seller is less than ₹10 crore in the immediately preceding financial year.
2. Sale Value: The value or aggregate value of sale consideration received from a single buyer during a financial year is less than ₹50 lakh.
3. Export of Goods: The goods are exported out of India.
4. Sale of Services: The transaction involves the sale of services rather than goods.
5. Government or Local Authority: The buyer is a Central or State Government, Embassy, High Commission, Legation, Consulate, Trade Representation of a Foreign State, or any local authority.

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TCS Deposit Due Date

The due date for TCS (Tax Collected at Source) deposit depends on the specific type of transaction and the applicable tax rate. However, generally, the TCS amount collected during a quarter must be deposited to the government within the 7th day of the subsequent month.

For example, if you collected TCS during the period from April 1st to June 30th, you would be required to deposit the amount by July 7th.

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How does the new TCS provision affect e-invoicing?

The introduction of the new TCS provision under Section 206C 1H has a direct impact on e-invoicing in India due to the following reasons:

• Inclusion of TCS in Invoice Value: When generating the Invoice Reference Number (IRN), the TCS amount included in the invoice value must be reported under "other charges." This means that the invoice value reported on the government portal will include the TCS amount. Consequently, this amount will also be automatically reflected in the GSTR-1 return.
• Receipt-Based TCS Collection: The new provision mandates TCS collection on a receipt basis rather than a sale basis. This means that sellers must collect TCS on any advances received from buyers, even if these advances are later adjusted against the final invoice. This approach differs from the traditional method of collecting TCS at the time of invoice issuance.
• Impact on E-Invoicing if TCS is Missing: If the TCS amount is not included in the invoice, there will be no direct impact on the e-invoicing process. However, it's important to note that this omission could lead to discrepancies in tax reporting and potential penalties if not addressed.

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