Industry's take on TCS under section 206C(1H) of the Income Tax Act
The insertion of Section 206C(1H) to the Income Tax Act of 1961 vide Finance Act of 2020 extended the current TCS provision a step further.
What is 206C(1H)?
According to the section, a seller has to collect tax at source @ 0.1% of the sale consideration exceeding fifty lakh rupees if it receives any consideration from a buyer for the sale of goods exceeding INR 50 lakhs in any financial year.
Buyers should not forget to provide their Permanent Account Number or the Aadhaar number to the seller. Because as per the proviso to section 206C(1H), if the buyer has not provided the same to the seller, then the seller will be entitled to collect tax as per the following terms:
No provision comes in force without certain conditions attached to it in order to achieve the intention of the legislation and to make the provision operative in practical circumstances. The conditions are as follows:
What are the challenges being faced by the Industry?
These were just some examples of the industries which have had the biggest hit on the introduction of this section. However, even other industries and organisations which are not specifically exempt from income tax elsewhere are also facing issues like huge expenditure in order to upgrade their SAPs, accounting softwares and to train the employees to comply with the new section.
This is not a criticism of the introduction of the provision. We understand the earnest intent of the introduction of TCS provisions - To bring un-organized sectors into the tax net. Such a move is appreciable as it would contribute to the betterment of the economy in long run. However, carving out of such special cases from the applicability of TCS, who are otherwise exempted from Income Tax, would be a welcome amendment by the industry.
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