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ANAYLSIS OF PROVISION OF SECTION -206 ON CASH SALE OF GOODS / SERVICES & ITS REPORTING IN AIR

COMPILED BY : CA RAMANDEEP SINGH BHATIA

Section - 206C, Income-tax Act, 1961BB.—Collection at source

Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc

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 in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods 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:

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Section - 206C, Income-tax Act, 1961Sl.

No.Nature of goods Percentage

(1) (2) (3)(i) Alcoholic Liquor for human consumption One per cent(ii) Tendu leaves Five per cent(iii) Timber obtained under a forest lease Two and one-half

per cent

(iv) Timber obtained by any mode other than under a forest lease

Two and one-half per cent

(v) Any other forest produce not being timber or tendu leaves

Two and one-half per cent

(vi) Scrap One per cent(vii) Minerals, being coal or lignite or iron ore One per cent:

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Section - 206C, Income-tax Act, 1961

(1A) Notwithstanding anything contained in sub-section (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 form33 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 purposes of generation of power and not for trading purposes.

(1B) The person responsible for collecting tax under this section shall deliver or cause to be delivered to the 34[Principal Chief Commissioner or] Chief Commissioner or 34[Principal Commissioner or] Commissioner one copy of the declaration referred to in sub-section (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him.

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Section - 206C, Income-tax Act, 1961

(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 cash 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:

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Section - 206C, Income-tax Act, 1961Sl. No. Nature of contract or licence or

lease, etc. Percentage

(1) (2) (3)

(i) Parking lot Two per cent

(ii) Toll plaza Two per cent

(iii) Mining and quarrying Two per cent.

Explanation 1.—For the purposes of this sub-section, "mining and quarrying" shall not include mining and quarrying of mineral oil. Explanation 2.—For the purposes of Explanation 1, "mineral oil" includes petroleum and natural gas.

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Section - 206C, Income-tax Act, 1961

“(1D)New Every person, being a seller, who receives any amount in cash as consideration for sale of bullion 35[***] or jewellery, or any other goods (other than bullion or jewellery) or providing any service, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,—

(i) for bullion, exceeds two hundred thousand rupees; or(ii) for jewellery, exceeds five hundred thousand rupees; or(iii) for any goods, other than those referred to in clauses (i) and (ii), or any service, exceeds two hundred thousand rupees:Provided that no tax shall be collected at source under this subsection on any amount on which tax has been deducted by the payer under Chapter XVII-B.

(1D)Old Every person, being a seller, who receives any amount in cash as consideration for sale of bullion 35[***] or jewellery, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,— (i) for bullion, exceeds two hundred thousand rupees; or(ii) for jewellery, exceeds five hundred thousand rupees.

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Section - 206C, Income-tax Act, 19611E) Nothing contained in sub-section (1D) in relation to sale of any goods (other than bullion or jewellery) or providing any service shall apply to such class of buyers who fulfil such conditions, as may be prescribed.

(1F)New Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent of the sale consideration as income-tax.”

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DEFINITION OF SELLER ?Seller” means1) the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or2) any company or3) firm or4) co-operative society and5) 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) or sub-section (1D) are sold or services referred to in sub-section (1D) are provided.

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DEFINITION OF BUYER ? Buyer” with respect to—(i) sub-section (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) sub-section (1D) 1[or sub-section (1F)] means a person who obtains in any sale, goods of the nature specified in the said sub-section;

♠ TCS is applicable even if buyer buys goods for his personal consumption.

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WHAT IF PAN NO , NOT PROVIDED ? ♠ TCS @ 1% to be collected even if no PAN is provided by the Purchaser.

In that case Form 60 to be obtained from the Purchaser and Return in Form 61 also to be filed (if Tax Audit applicable).

Deduction at higher rate in case PAN not available (Section 206AA) is not applicable for

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IS QUOTING OF PAN MANDATORY? RULES 114B, 114C, 114D [Applicable w.e.f. 01/01/2016] (Requirement for Quoting PAN in specified transactions)

- For General Transactions of Sale or Purchase of Goods or Services of any nature PAN to be quoted where amount exceeds Rs. Two lacs per transaction- For Sale or purchase of motor vehicle PAN to be quoted irrespective of amount.-For Sale of purchase of immovable property PAN to be quoted for amount > 10 lacs.-For Purchase of foreign currency in cash PAN to be quoted for payment exceeding Rs. 50000 at any one time.-For Payment in cash for services to Hotel or restaurant PAN to be quoted, against a bill exceeding Rs. 50,000 at any one time. ForPAN to be quoted for Payment in cash for services in connection with foreign travel exceeding Rs. 50000 at any time.

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IS TCS TO BE COLLECTED ON CASH RECEIVED?

What section Says ?

“Every person, being a seller, who receives any amount in cash as consideration for sale of bullion 35[***] or jewellery, or any goods (other than bullion or jwellery) shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,

That Means : Invoice value , irrespective some portion may be received in other mode than cash

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IF CONSIDERATION OF AMOUNT FOR GOODS SOLD/PROVISION OF SERVICE, DIRECTLY DEPOSITED BY CUSTOMER IN THE BANK ACCOUNT OF SELLER??

Yes, then TCS provision is applicable, as amount received in cash but deposited in bank.

Does receipt of bearer cheque or cheque which is crossed without the words “account payee” amount to receiving consideration in cash?

Since Section 206 (1D) uses the words cash, and not “otherwise than by crossed account payee cheque or bank drafts” like in other provisions, it would appear that bearer cheque or cheques crossed without the words “account payee” would not be regarded as “cash”. This matter also needs CBDT’s clarification.

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Whether TCS is applicable where goods are exchanged under Barter System [say Motor Vehicle is exchanged for another Motor Vehicle]

Since TCS is applicable only to receipt of cash as consideration for sale, TCS provisions u/s 206C(1D) shall not apply where payment is received through exchange of goods.

But provided if after exchange, certain amount is received in cash, TCS provision will be applicable and therefore tax @ 1% to be collected on entire Invoice Value.

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COLLECTION OF TCS TO BE ON RECEIPT BASIS OR ON INVOICE BASIS?

Act Says – “Every person being a seller,…………….at the time of receipt of such amount, collect from the buyer…………” – Sub Section 1DCollection of TCS to be on Receipt basis; no regards to when Invoice raised.

In case Invoice generated before applicability of law and amount received in cash after June, 2016; whether TCS provision will be applicable?No liability arises to collect TCS; as event arises (Sale of Goods/Provision of Service) already before applicability of law, no need to collect tax at source along with amount received for sale consideration during the period, law became effective.

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Limit of Rs. 2,00,000/- will be considered on amount inclusive of Tax or exclusive of Tax?

Based on the reading of the provisions, it is inferred that, for Limit amount will be considered inclusive of VAT/Service Tax i.e. Sales Consideration

Rate of 1% for collection of TCS to be charged on Value inclusive of Tax or exclusive?

Act – “…….a sum equal to one percent of the Sale Consideration as income tax”.+

TCS to be collected on Value inclusive of VAT/Service Tax i.e. on our Invoice Amount.

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Discount given to buyer/service provider will be considered or not?

TCS to be collected on Invoice Value (which is after deducting discount), which means discount to be considered, if and only if discount is given on Invoice value, in case is given through any mode, say by raising credit note discount will not be considered.If bill raised, for two different goods sold/two different services provided and single bill raised, whose value exceeds Rs. Two Lakh, whether TCS provision will be applicableYes, TCS is to be collected, as the seller/service provider create a single invoice, it can be for two different goods/services. So even though the individual value do not exceed Rs. Two Lakhs, but if the invoice amount exceeds Rs. 2,00,000, then TCS is to be collected from customers.

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Whether TCS to be collected, in case amount on which TDS not deducted does not exceed Rs. 2,00,000/-?

Yes, Since Invoice amount exceeds and there is some cash payment involved.

TDS Provisions applicable on part of the amount only, then TCS is to be collected? If yes, on what amount?

Example – Service provided of Rs. 2,50,000; from service receiver Rs. 2,00,000 received after deduction of TDS on such amount and rest Rs. 50,000 received in cash from service receiver.

TCS is to be collected on Rs. 50,000/- at the rate of 1%, therefore from service receiver Rs. 50,500 (50000+500) to be collected.

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TDS Provisions applicable on part of the amount only, then TCS is to be collected? If yes, on what amount?

Example – Service provided of Rs. 2,50,000; and Rs. 2,00,000 received after deduction of TDS on such amount and rest Rs. 50,000 received in cheque, from service receiver;

no need to collect TCS.

Example – Service provided of Rs. 2,50,000; and Rs. 2,00,000 received after deduction of TDS on such amount and rest Rs. 45,000 received in cash and Rs. 5,000 in cheque, from service receiver.

TCS is to be collected on Rs. 50,000/- at the rate of 1%, therefore from service receiver Rs. 50,500 (50000+500) to be collected.

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Is the threshold limit Rs. 2,00,000 ; transaction-wise/ person – wise or in aggregate?

Based on the reading of the provisions, it is inferred that the threshold limit for the purpose of collection of tax of Rs. 2,00,000 in case of sale of goods/provision of services should be considered transaction-wise and not aggregate of all the transactions for the year.

Example – In case of Motor Vehicle, to a single customer, 3 old cars are sold of value Rs. 1,50,000 and Rs. 1,80,000 and Rs. 1,90,000 with three different invoice raised.

Now here since limit of Rs. 2,00,000 will be considered transaction wise i.e. Value of each car sold though different invoice, and in above said example no Invoice Value (i..e value of old car) exceed Rs. 2,00,000. Therefore, no liability to collect Tax at Source arises.

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If motor vehicle sold of value less than Rs. 10,00,000 but more than Rs. 2,00,000 and any amount of sales consideration received in cash; whether TCS provision will be applicable?

From reading the provision, clause (iii) of sub section 1D excludes only clause (i) and clause(ii) of such sub section, which means clause (iii) covers every event of sale of any goods (i.e. it can be motor vehicle), other than bullion or jewellery of value more than Rs. 2,00,000 provisions of TCS will be applicable.

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Amount of Sale Consideration received in parts/stages?

Illustration: Motor vehicle worth 20 lakh is sold and for which payments arc made in installments, one at the time of booking and the other at the time of delivery. At the time of booking 5 lakh rupees are paid and 15 lakh rupees are paid at the time of delivery.

Tax at the rate of 1 % on 5 lakh rupees at the time of booking and at the rate of I % on remaining 15 lakh rupees at the time of delivery shall be collected at source.

Similar will be the position with regard to collection of tax at source under sub-section (1 D) of section 206C.

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In case, motor vehicle of value more that Rs. 2 Lakh but less than or equal to Rs. Ten Lakh, financed and part amount received from Financer and some amount in cash from buyer, when and how TCS to be collected?

Tax is to be collected at the rate of 1% on booking amount at the time of booking and rest amount of TCS i.e. 1% on sales consideration, after deducting TCS collected at the time of booking;

but in Finance case, part of the amount is received from Financer, here at the time of receiving margin money (before receiving money from Financer) from buyer tax at the rate of 1% can be collected, considering practical situation.

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In case any amount received, refunded to buyer/service receiver after payment of TCS to Government, in the event service being not provided/ or sold goods returned?

Buyer/service receiver, amount refundable can be amount agreed between seller/service provider and buyer/service receiver, in respect of Goods sold/Provision of Service, not amount collected from buyer/service receiver for TCS can be refunded to buyer/service receiver, as tax collected from customer would being already paid to Government and in Act there is no provision of refund of TCS deposit or to adjust such TCS deposit, only provision for TDS is specified.

So practically, it would not be possible to refund tax to buyer/service receiver on cancellation of services to be provided or return of goods of value after depositing it with Government.

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“ Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ten lakh rupees, shall at the time of receipt of such amount, collect from the buyer, a sum equal to one percent of the sale consideration as income tax.– Sub Sec. 1F New of Section 206C.

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Definition of Motor Vehicle?Does it include two wheeler also, buses , Trucks also ?

under section 2(28) of the Motor Vehicle Act, 1988, which read as under :

‘”motor vehicle” or “vehicle” means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty five cubic centimetres.”

It includes trucks, buses, two-wheelers and cars.

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Whether TCS to be collected, if Motor vehicle of value exceeding Rs. 10,00,000 purchased for personal consumption from Retail Buyer?

Act – “ sub –section (1D) or (1F) means a person who obtains in any sale, goods/services of the nature specified in the said sub-section” – Explanation 1.Yes, still Tax is to be collected at Source; as definition of Buyer is amended for clause VII in Bill passed in Lok Sabha, which specifically covers everyone as buyer, no one is excluded from Scope.

Rate of 1% for collection of TCS to be charged on Ex-showroom Price or On-Road Price?

Act – “…….a sum equal to one percent of the Sale Consideration as income tax”.TCS to be collected on Ex-showroom Price i.e. again on Sale Consideration (the Invoice amount, which include VAT)

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Whether Manufactures, Supplier , Inter Dealer will also collect TCS?

Yes, Manufacturers will also collect TCS from Dealers; as everyone is covered.

If Ex-showroom Price of motor vehicle exceeds Rs. 10,00,000 but after giving discount, value is less than or equal to Rs. 10,00,000; whether TCS is to collected?

No need to collect TCS, as liability of TCS arises only if sales consideration (invoice amount) exceeds Rs. 10,00,000, but after giving discount to customers the invoice amount do not exceed Rs. 10,00,000 and hence no liability of TCS arises.

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Whether amount of TCS to be collected at the time of Receipt of Booking Amount?

Yes, on first receipt itself the TCS to be collected, which means TCS is to be collected with booking amount itself

If Ex-showroom Price of motor vehicle exceeds Rs. 10,00,000 but after giving discount, value is less than or equal to Rs. 10,00,000; whether TCS is to collected?

No need to collect TCS, as liability of TCS arises only if sales consideration (invoice amount) exceeds Rs. 10,00,000, but after giving discount to customers the invoice amount do not exceed Rs. 10,00,000 and hence no liability of TCS arises.

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RULE - 114E. -ANNUAL INFORMATION RETURN

(1) The statement of financial transaction required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in respect of a financial year in Form No. 61A and shall be verified in the manner indicated therein.

(2) The statement referred to in sub-rule (1) shall be furnished by every person mentioned in column (3) of the Table below in respect of all the transactions of the nature and value specified in the corresponding entry in column (2) of the said Table in accordance with the provisions of sub-rule (3), which are registered or recorded by him on or after the 1st day of April, 2016, namely:—

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Sl. No. Nature and value of transaction Class of person (reporting person)

(1) (2) (3)

11. Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature

(other than those specified at Sl. Nos. 1 to 10 of this rule, if any.)

Any person who is liable for audit under section 44AB of the Act.

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(3) The reporting person mentioned in column (3) of the Table under sub-rule (2) (other than the person at Sl. No. 9) shall, while aggregating the amounts for determining the threshold amount for reporting in respect of any person as specified in column (2) of the said Table,— (a) take into account all the accounts of the same nature as specified in column (2) of the said Table maintained in respect of that person during the financial year;

(b) aggregate all the transactions of the same nature as specified in column (2) of the said Table recorded in respect of that person during the financial year;

(c) attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons, in a case where the account is maintained or transaction is recorded in the name of more than one person;

(d) apply the threshold limit separately to deposits and withdrawals in respect of transaction specified in item (c) under column (2), against Sl. No. 1 of the said Table.

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CA . RAMANDEEP SINGH BHATIA

Qualifications :

FCA, CS (EXE) , BCOM,CERT. IFRS, CERT. IDT, CERT. CBA, DISA

Associated to:

-Trainer ICAI Raipur- GMCS/OTC/ITT- Trainer MCA Investor Awareness Program- Editor Newsletter Income Tax Bar Association Raipur- Vice President (Training) – JCI Raipur Capital- Executive Member of Governing Board of CG IDT Association

+919827152729 ca.ramandeep@yahoo.com

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