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The Central Board of Direct Taxes (CBDT) has clarified that 0.1% Tax Collected at Source (TCS) on sale of goods and services worth more than ₹50 lakh a year, will be levied on the total sales consideration including the GST applied. The tax department has said that no adjustments on account of sale returns, discounts or indirect taxes including GST is required to be made for collection of the TCS. The new TCS will comes into force from 1st October 2020. Apart from this, the government is also going to levy Tax Deducted at Source (TDS) of 1% on payment made by e-commerce operators to e-commerce participants, from 1st October 2020 onwards. While there are no thresholds for levying the TDS, for an individual or Hindu Undivided Family (HUF), TDS is applicable, only if the payment made during the year exceeds ₹5 lakh.
In the guidelines issued recently, the tax department also clarified that though the two levies come into effect from 1st October, the respective thresholds for application of the two levies are based on sales or payments in the previous year and hence the threshold would be calculated on the basis of sales from 1st April 2020. So, if a seller has already sold goods worth ₹50 lakh till 30th September 2020, any sales from 1st October 2020 will attract 0.1% TCS. A recent survey conducted by EY and SAP India found that corporate India is not entirely prepared to deal with various tax implications of the TCS provisions. According to the survey, 85% of respondents acknowledged that their current tax function framework is not completely geared up to comply with the new TCS regime.
The tax department has also clarified that payments made for e-commerce purchases involve two transactions ; one when the buyers makes the payment through the payment gateway, and one after the e-commerce platform receives the money through payment gateway. With payment gateway also qualifying for e-commerce platform, the department clarifies, that either the payment gateway or the e-commerce platform can deduct the TDS.
On sale of motor vehicles above ₹10 lakh, which already attracts TCS of 1%, the tax department has clarified that since TCS of 1% on sale of motor vehicle with cost more than ₹10 lakh is B2C sales, sales to dealers will be considered for triggering the new TCS. However, sales of motor vehicles worth ₹10 lakh or less, which do not already attract a TCS of 1%, will also be included for calculation of sales for levying 0.1% TCS.
The guidelines also clarified that any transactions in securities, commodities through registered exchanges or electricity transaction, energy savings certificates etc. will be kept out of the ambit of these new TCS and TDS provisions.