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Everything you should know about TCS (Tax Collected at Source)

TCS (Tax Collected at Source) is a concept that is covered under both Income Tax Act and GST Act. TCS is collected by the seller from their buyer on the specified goods. The list of goods on which TCS is applicable is covered under Section 206C of the Income Tax Act. Let us understand the concept of TCS in brief.

 

 

1. What is TCS?

TCS is an abbreviated form of Tax collected at source. Under this concept the seller collects the tax at the time of sale and seller is liable to remit the tax into the account of the government.

2. List of goods that come under TCS provisions and their applicable rates

As we already discussed that Section 206C of the Income Tax Act specifies the list of goods on which TCS is applicable. Now let us see the list of goods and applicable tax rate on such specified goods. 

Here is the list of goods that comes under TCS and their applicable tax rates:

S. No. List of Goods TCS Rate
1 Liquor for human consumption (containing alcohol) 1%
2 Scrap 1%
3 Minerals such as coal and iron ore 1%
4 Bullion that surpasses over 2,00,000 INR or any jewellery above 5,00,000 INR 1%
5 Any motor vehicle purchase that exceeds the limit of 10,00,000 INR 1%
6 Toll Plaza, parking lots and, Mining and Quarrying 2%
7 Timber wood in a leased forest 2.50%
8 Timber wood by any other mode than forest leased 2.50%
9 Any other forest produce (excluding Tendu leaves and timber wood) 2.50%
10 Leaves of Tendu 5%

Further, it shall be noted that if the above goods are used for manufacturing and processing that tax will not be applicable to them. Howsoever, in the case of trading, only these goods will be taxable.

3. List of Sellers and Buyers classified for TCS

1. Seller’s List

Here is the list of some specific people or entity that can collect tax at source from the buyer:

  • Central Government
  • State Government
  • Statutory authority or Statutory Corporation
  • Local Authority
  • Registered Companies
  • Co-operative Societies
  • Partnership firms
  • Any other person or Hindu undivided family (HUF) whose books of accounts have to be audited under Income tax act for that specific financial year.

 2. Buyer’s List

Just like sellers, there is a list of buyers that are liable to pay tax at the source itself. Now let us see the list of buyers

  • Central Government
  • State Government
  • Public sector companies
  • High commission Embassy
  • Foreign Nation’s consulate
  • Social clubs, sports clubs and other clubs

4. Due Date for paying and filing TCS

The due date for paying TCS and TCS filing are:

Collection Month Quarter End TCS Payment Due Date TCS Return Filing Due Date
April 30th of June 7th of May 15th of July
May 7th of June
June 7th of July
July 30th of September 7th of August 15th of October
August 7th of September
September 7th of October
October 31st of December 7th of November 15th of January
November 7th of December
December 7th of January
January 31st of March 7th of February 15th of March
February 7th of March
March 7th of April

 

Note: The TCS collector shall deposit the collected tax in the Challan 281 within the time frame of 7 days to the government. However, if he fails to do so then the interest would be charged at 1% per month or part of the month thereof. 

Moreover, it shall be noted that every TCS collector shall furnish the TCS Return in the Form 27EQ in the particular quarter in which the tax was collected. 

5. TCS Certificate

Once, the seller furnishes his TCS Return for the respective quarter then he has to provide a TCS certificate i.e. Form 27D to the buyer of such goods. This TCS certificate lists the following details a

  • Name of the buyer
  • Name of the seller
  • Seller’s TAN
  • Seller’s and Buyer’s PAN
  • Amount of Tax collected by the seller
  • The applied tax rate
  • Date of tax collection at source (TCS)

Furthermore, the TCS certificate shall be issued by the seller to the buyer within the time period of 15 days from the TCS Return furnishing date. The due dates of providing TCS certificate are:

Quarter Ending Date for generating TCS Certificate (Form 27D)
30th of June August 15th
30th of September November 15th
31st of December February 15th
31st of March June 15th

6. TCS Exemptions

Here is the list of exemption under which TCS provisions are not applicable:

  1. When the person has bought the listed goods for personal consumption.
  2. If the goods are used for manufacturing or processing purpose instead of trading.

7. Treatment of TCS under GST

An e-commerce operator is liable to collect tax on behalf of the supplier of goods and services under GST that are supplying their product and services using their online platform.

The e-commerce operator has to collect 1% GST on all the taxable supplies made by the supplier. This 1% GST can include 1% IGST or 0.5% CGST and 0.5% SGST, respectively. 

The due date for depositing TCS under GST for the e-commerce operator is 10th of every subsequent month.

Let us understand this with an example

Assuming Mr X is a toy seller on Flipkart (e-commerce operator). In the month of May, Mr X received an order of 50,000 INR (tax and commission inclusive). Now the Flipkart will provide the net amount to Mr X after collecting TCS (1% of 50, 000) i.e., 50,000-500= 49,500 INR. Now, the Flipkart will be liable to deposit this 500 INR into the account of government on or before 10th of June.