Welcome clarification by
CBDT on TCS on Cash Sale.
CBDT vide Circular No.
23/2016 dt. 24 June 2016 has clarified on FAQs of stakeholders reg. scope of
the provisions and the procedure to be followed in case of the amended
provisions of Section 206C of the Income Tax Act, as under:
CBDT Circular No. 23/2016
dt. 24 June 2016
In order to curb the
cash economy, Finance Act 2016 has amended section 206C of the Income-tax Act
to provide that the seller shall collect tax at the rate of one per cent from
the purchaser on sale in cash of certain goods or provision of services
exceeding two lakh rupees. Subsequent to the amendment, a number of
representations were received from various stakeholders with regard to the
scope of the provisions and the procedure to be followed in case of the amended
provisions of Section 206C of the Act. The Board, after examining the
representations of the stakeholders, issued FAQs vide circular.No.22/2016 dated
8th June, 2016. The Board has further decided to clarify the issue as regards
applicability of the provisions relating to levy of TCS where the sale
consideration received is partly in cash and partly in cheque by issue of an
addendum to the above circular in the form of question and answer as under:
Question 1: Whether tax
collection at source under section 206C(1D) at the rate of 1% will apply in
cases where the sale consideration received is partly in cash and partly in
cheque and the cash receipt is less than two lakh rupees.
Answer : No. Tax
collection at source will not be levied if the cash receipt does not exceed two
lakh rupees even if the sale consideration exceeds two lakh rupees.
Illustration: Goods
worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.4 lakhs
has been received in cheque and Rs.1 lakh has been received in cash. As the
cash receipt does not exceed Rs.2 lakh, no tax is required to be collected at
source as per section 206C (1D).
Question 2: Whether tax
collection at source under section 206C (1D) will apply only to cash component
or in respect of whole of sales consideration.
Answer: Under section
206C (1D), the tax is required to be collected at source on cash component of
the sales consideration and not on the whole of sales consideration.
Illustration: Goods
worth Rs. 5 lakhs is sold for which the consideration amounting to Rs.2 lakhs
has been received in cheque and Rs.3 lakh has been received in cash. Tax is
required to be collected under section 206C (1 D) only on cash receipt of Rs.3
lakhs and not on the whole of sales consideration of Rs.5 lakh.
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