The export of goods will be exempted from new provision of the tax collected at source (TCS), the Finance Ministry said on Wednesday. New provision of TCS applicability for sale consideration of ₹50 lakh or more is coming into effect from Thursday.

This provision was made in the Budget this year. The rate of TCS would be 0.1 per cent. TCS and TDS (tax deducted at source) are two means of tax collection. Under TCS, the seller receives payment along with tax at a fixed rate and then deposits it with the government. TDS means buyers make payment after deducting tax at a fixed rate.

In a detailed clarification, the Ministry touched upon various points apart from the exemption for export. In cases other than export, it said, TCS will be applicable only on the amount received on or after October 1. For example, a seller who has received ₹1 crore before October 1 from a particular buyer and received ₹5 lakh after the date, would be required to collect tax on ₹5 lakh only. It also said that TCS applies only in cases where the receipt of sale consideration exceeds ₹50 lakh in a financial year.

Further, the seller in most of the cases maintains a 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 October 1, 2020, without making any adjustment for the amount received in respect of sales made before the said date. Mandating the collector to identify and exclude the amount in respect of sales made up to September 30, 2020, from the amount received on or after October 1 would have resulted into undue compliance burden for the collector and also litigation.

According to the Ministry, TCS is not an additional tax but is in the nature of advance income-tax/TDS for which the buyer would get the credit against his actual income tax liability and if the amount of TCS is more than his tax liability, the buyer would be entitled for refund of the excess amount along with interest.

In order to reduce the compliance burden, as the Ministry said, this TCS is made applicable to only those sellers whose business turnover exceeds ₹10 crore. In other words, those having turnover of less than ₹10 crore will not be required to collect TCS. There are only around 3.5 lakh persons who have disclosed business turnover of more than ₹10 crore in FY 2018-19. There are around 18 lakh entities which already deal with TDS/TCS. Therefore, this TCS collection under these new provisions would be required to be made by persons who, in most of the cases, would already be complying with the other provisions of TDS/TCS.

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