Taxation is a vital part of any country’s economy. There are different procedures in the tax which already contains a verified amount which the business person is asked to deposit at the right time and place. Having a clear structure of the tax conforming to the financial system also plays an import in the tax system of a country. That is why the efficiency of any tax system depends to a great extent on its clarity, transparency, stability, cost-effectiveness, and convenience.
In this blog, we will go through the details of the latest reforms in tax collection at source (TCS) provision by the tax department.
Intending to further increase the tax-net, the Government of India has expanded its scope by making several changes to the Tax Collected of Source (TCS). The Government of India has amended section 206C by adding a new sub-clause (1H), which has been added as section 206C (1H) of the Income Tax Act, 1961, concerning “collection of tax at source”. All new TCS provisions will be applicable from October 1, 2020.
Article Content-
- What is TCS?
- What is TCS under GST?
- Who is responsible for collecting TCS under GST?
- Mode Of Deposit
- TCS rate chart for FY 2021-2022
- A Summary of Tax Collected at Source (TCS)
- Rate of Collection of TCS under GST compliance
- FAQs (Frequently Asked Questions)
- How does SWIL software assist its users on Tax Collection at Source (TCS)?
What is TCS?
Tax Collected at Source (TCS) is an income tax collected by the seller of specified goods from the buyer. It is a concept where a person selling specific goods collects tax from the buyer at a fixed rate and is liable to deposit it with the government. For example:- A person (P) purchases jewelry items from Jewelry shop (Q) worth rupees 10,00,000. P will now be liable to pay rupees 10,10,000 to Q. It is when TCS is applicable at the rate of 1%.
What is TCS under GST?
The tax collected at source (TCS) under GST means tax received by an e-commerce operator using an online platform, on behalf of the supplier of goods or services received. TCS will be charged as a percentage on the net taxable supplies.
The IGST Act imposes a 1% fee on TCS (0.5% CGST and 0.5% SGST). The e-commerce site deducts the sum and gives the supplier the balance.
Who is responsible for collecting TCS under GST?
Some operators who operate and efficiently manage e-commerce platforms are a liable person to collect TCS. TCS only applies when operators collect considerations from customers on behalf of vendors or suppliers.
The e-commerce operator responsible for collecting TCS is required to register under GST. No limit is waived to the operator for this. Also, sellers who supply their goods through online portals are required to be registered under GST. However, some exceptions exist.
Mode Of Deposit
There are two ways to transfer money to the national government:
- The first is to submit it digitally. For all corporate assessees and any other assessee for whom the provisions of section 44AB are applicable, the most recent provisions have made e-payment of TCS mandatory.
- The alternative is to do it physically. Contact any authorised bank branch and give challan no. 281.
TCS rate chart for FY 2021-2022
The guidelines for tax that is collected at source are outlined in Section 206C of the Income Tax Act of 1961. It outlines the prices TCS will be charged for particular items and services. They are listed below:
| Particulars | Rate |
| Alcoholic liquor for human consumption and Indian made foreign liquor | 1% |
| Sale of scrap | 1% |
| Sale of tendu leaves | 5% |
| Sale of timber obtained under a forest lease, or any other mode | 2.5% |
| Sale of any other forest produce not being timber, or tendu leaves | 2.5% |
| Sale of minerals – coal, lignite, or iron ore | 1% |
| Lease or license of parking lot, toll plaza, mining and quarrying (other than that of mineral oil, petroleum, and natural gas) | 2% |
| Sale of motor vehicle (in cheque or any other mode) exceeding Rs. 10 lakh in value | 1% |
| Foreign remittance under the Liberalized Remittance Scheme of the RBI, with a value exceeding Rs. 7 lakh in a financial year | 5% |
| Foreign remittance under the Liberalized Remittance Scheme of the RBI, with a value exceeding Rs. 7 lakh in a financial year if the amount remitted is out of a loan taken from a financial institution for the purpose of education | 0.5% |
| Sale of overseas tour package | 5% |
| Sale of goods of value exceeding Rs. 50 lakh (other than goods mentioned above) whose gross receipts, or total sales, or turnover from business exceeds Rs. 10 cr. in immediately preceding financial year | 0.1% |
A Summary of Tax Collected at Source (TCS)
The Tax Collection at Source (TCS) under the GST is the concept where the seller collects a percentage of tax from the buyer on the sales amount. The tax collected by the seller is then to be deposited with the government. It is applied to selected transactions involving prescribed goods and services.
A seller who receives any amount on the sale of any goods aggregating to 5 million or more in a financial year from a buyer, at the time of receipt of such amount is required to collect tax at source (TCS) at the rate 0.1 percent on the sale consideration exceeding INR 5 million as income-tax. If the buyer fails to provide PAN/Aadhar, TCS shall be collected at the rate of 1 percent.
The new provisions added by subsection 1(H) of section 206C under GST will be Applicable from the 1st of October, 2020.
Rate of Collection of TCS under GST compliance
Rates in the absence of a PAN
According to section 206CC, the larger of the following rates is taken into account in this situation:
- Twice the standard rate, as permitted under the specified provisions
- 5% (or 1% in the event that products sold for more than Rs. 50 lakh, as stated in the last point)
Rates for ITR non-filers
Section 206CCA of the Income Tax Act was included in the Government Budget of 2021. TCS shall be applied at the higher of the following rates for specified persons (non-ITR filers) in accordance with the provisions:
- Twice the standard rate, as permitted under the specified provisions
- At 5%
TCS exemptions
Under the following conditions, TCS is exempt:
- When the products are bought for personal consumption.
- When the products are bought with manufacturing, processing, or production in mind rather than commerce.
Due date while depositing the TCS
The Tax Collection at Source (TCS) will be deducted in the month in which the supply is made. The payment of the tax collected will be made in the following manner:
- One is, IGST & CGST will be paid to the central government
- Second is, SGST to respective state governments
TCS Return Filing
Each quarter, tax collectors are required to file TCS returns. The collector completes Form 27EQ to do this. The interest must be paid before filing the return if there is any delay in depositing the money with the government.
Certificate of Tax Collected at Source (TCS)
- A seller that collects taxes is required to give the buyers Form 27D, sometimes referred to as a TCS certificate, within 15 days of the date of filing quarterly TCS returns.
- It is provided to customers so they can submit TCS returns for each fiscal year.
- The organisation in charge of collecting taxes may issue a replacement certificate if the original TCS certificate is lost. Printing out Form 27 on plain paper and having it attested can be done to accomplish this.
- Details included in a TCS certificate (Form 27D) include the following:
- Name of the seller and buyer
- Date of collection
- PAN of the seller and buyer
- TAN of the seller who collects taxes
- Applied tax rate
- Total tax collected by the seller
FAQs (Frequently Asked Questions)
What makes TDS and TCS different from one another?
While making a payment, an entity will deduct TDS from the deductee’s source of income. TCS, on the other hand, is a fee charged to retailers when customers purchase certain goods.
What is the penalty for filing TCS returns incorrectly?
Tax collectors may be fined under Section 271H if they submit false TCS returns. Due to incorrectly completing a TCS return, a seller may be required to pay a penalty cost that can range from Rs. 10,000 to Rs. 1 lakh.
What does TCS mean in terms of GST?
The government implemented TCS under Goods and Service Tax to keep track of transactions made through online marketplaces. In simple, it is a tax that an online retailer collects when they sell products through their website.
Is it mandatory for a collector to have PAN and TAN?
Yes. A tax collector must have and provide PAN and TAN while completing quarterly TCS returns. Banks will only accept TCS payments from a business if it has a TAN and PAN.
How does SWIL software assist its users on Tax Collection at Source (TCS)?
SWIL provides all types of retail, wholesale, and distribution businesses in every possible way. Whether it is to manage the business or GST related issues. We determine and support the applicability of the above TCS provision based on the nature of the business and each business transaction. Our software products allow you to easily file TCS.
For more information, you can contact our support team or take the help of the following blogs:
https://support.swildesk.com/portal/en/kb/articles/tcs
https://support.swildesk.com/portal/en/kb/articles/how-to-implement-tcs-settings-in-unisolve
