TCS on Cash Sale , CBDT issued 2nd Circular for Clarification

By | June 25, 2016
(Last Updated On: October 8, 2016)

CBDT

Circular No. 23/2016

F.No.370142/17/2016-TPL

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

(TPL Division)

New Delhi, Dated 24 June 2016

Subject : Amendment in section 206C of the Income Tax Act vide Finance Act  2016 -Clarification regarding

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 lakha

( Pitambar Das)

Director ( TPL-III)

Education Guide Books on TCS on Cash Sale/ TDS


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6 thoughts on “TCS on Cash Sale , CBDT issued 2nd Circular for Clarification

  1. Pingback: TCS on cash sale of goods or services > Rs 2 Lakh wef 1.6.16 | Tax Heal

  2. Pingback: Section 206c(1d) of Income Tax act | Tax Heal

  3. devender

    As per circular no.22/2016 and Circular no.23/2016 of cbdt Section Clarifying regarding the Section 206 of Finance Act 2016. TCS is applicable only if part of Cash payment Exceeds Rs.2 Lakhs whatever the Sale consideration may be. In the case of jewellery market TCS limit is Rs.5 lakh. Does this mean that TCS is applicable only if Cash component in any transaction exceeds Rs.5 lakh ? . Is there any clarification in this regards. Please clarify..

    Reply
    1. CA Satbir Singh Post author

      Devender Ji , Clarification under Circular No 22/2016 is issued under section 206C (1D). In the case of jewellery market TCS limit is Rs.5 lakh which also falls under Section 206 C (1D)(ii) it means TCS is applicable only if Cash component in any transaction exceeds Rs.5 lakh

      Reply
  4. S.Rehman

    Dear Sir, I wanted to know that if the supplier is making goods on regular basis and issuing multiple bills according to the goods supplied and at times we have to give cash advance on different bills, as in:-

    We gave an order to Shyam Singh (unregistered supplier) to manufacture 500 baskets @ 700/- per basket=3,50,000/- We gave 1,75,000/- in cash and rest 1,75,000/-by Cheque. As per the Amendment in section 206C of the Income Tax Act vide Finance Act 2016 -Clarification, TCS is not to be deducted.

    Now we place him another order to Shyam Singh(unregistered supplier) to manufacture 400 lanterns @ 700/- per piece = 2,80,000/- Now if we pay him 1,50,000/- in cash and rest 1,30,000/- vide Chq. What will be the condition??? The total trade with Shyam Singh is now for Rs6,30,000/- in a financial year. And the total payment made by Cash in Financial Year to Shyam Singh is 3,25,000/- Does Shyam Singh need to deduct TCS from buyer????? Please elaborate outcome

    Reply
    1. CA Satbir Singh Post author

      Provisions are applicable for each bills seperately

      Reply

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