TCS on Profit and Gains from the Business of trading in Alcoholic Liquor, Forest Produce, Scrap, etc. [Section 206C]

Section 206C relating to tax collection at source is applicable in the following two cases:

(A)       Tax be collected by seller from the buyer in respect of sale of specified goods.

(B)     Tax to be collected by a person granting lease / license right in case of Parking Lot, Toll Plaza or Mining and Quarrying.

(A) Seller to Collect Tax from buyer in respect of Sale of certain Specified Goods

(1)   Tax to be collected at the lime of debiting / receipt of the amount from buyer [Section 206C (1)]

Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer, whichever is earlier, collect from the buyer as income tax, the sum specified in the following table on the goods mentioned therein:

No surcharge or health and education cess shall be added to the above rates. hence, tax will be collected at source at the basic rate

Meaning of scrap: "Scrap" means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. [Explanation (b) to section 206C]

Self-declaration by buyer if relevant goods are purchased for manufacturing or producing any articles or things [Section 206C(1A) & Rule 37C]

Notwithstanding anything contained in section 206C (1), no collection of tax shall be made in the case of a buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form (Form No. 27C) and verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things or for the purpose of generation of power and not for trading purposes.

A builder is not competent to furnish Form No. 27C as he does not buy timber for the purpose of manufacturing, processing and producing article or things

Similarly, a buyer who is a trader is not authorized to furnish Form No. 27C.

Mere delay in furnishing Form 27C would not make assessee liable for non-collection of TCS under section 206C(1A).

Declaration furnished under section 206C(1A) to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner [Section 206C(1B)]

The person responsible for collecting tax under this section shall deliver or cause to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner one copy of the declaration referred to in section 206C( IA) on or before the seventh day of the month next following the month in which the declaration is furnished to him.

(2) TCS on sale of motor vehicle exceeding the value of Rs. 10,00,000 [Section 206C(1F)]

Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding Rs. 10 Lakh, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 1% of the sale consideration as income-tax.

 "Seller" means:

(i)         the Central Government, or

(ii)        a State Government. or

(iii)       any local authority, or

(iv)       corporation or authority established by or under a Central, State or Provincial Act, or

(v)        any company, or

(vi)       firm, or

(vii)      co-operative society.

It also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which the goods of the nature specified in the Table in sub-section (1) are sold.

"Buyer" means:

 "Buyer°' with respect to—

(i)      section 206C(1) means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods but does not include.—

(A)     a public sector company, the Central Government, a State Government, and an embassy, a high Commission, legation, commission, consulate and the trade representation, of a foreign State and a club; or

(B)     a buyer in the retail sale of such goods purchased by him for personal consumption;

(ii)        omitted;

(iii)    "sub-section (1F) means a person who obtains in any sale, goods of the nature specified in the said sub-section, but does not include,—

(A)     the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or

(B)          a local authority as defined in Explanation to clause (20) of section 10; or

(C)     a public sector company which is engaged in the business of carrying passengers."

In other words, the Act has exempted the following class of buyers such as the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; local authority as defined in explanation to clause (20) of section 10; a public sector company which is engaged in the business of carrying passengers, from the applicability of the provision of sub-section (1F) of section 206C of the Act (relating to TCS on motor vehicle).

(3)   TCS from buyer on receipt of any amount as consideration for sale of any goods of the value or aggregate of such value exceeding Rs. 50 Lakhs [Section 206C(1H)]

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 Rs. 50,00,000 in any previous year, other than the goods being exported out of India and goods covered in section 206C(1) or (1F) or (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1% of the sale consideration exceeding Rs. 50,00,000 as income-tax:

TCS shall be 1% instead of 0.1% if PAN or Aadhaar is not provided [First proviso to section 206C (1H)]

Section 206C (1H) not to apply if buyer is liable to deduct TDS under any other provisions [Second proviso to section 206C (1H)]

Provided further that the provisions of section 206C(1H) 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.

(B) Tax to be collected at source in case of Parking Lot, Toll Plaza or Mining and Quarrying [Section 206C(1C)]

The scope of section 206C has been further extended by inserting the following sub-section (1C).

Every person, who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company (hereafter in this section referred to as "licensee or lessee") for the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by the licensee or lessee to the account of the licensee or lessee or at the time of receipt of such amount from the licensee or lessee in case or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the licensee or lessee of any such licence, contract or lease of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax: