What is TCS and how do we implement it in Tally? This has become a very important topic for consideration with lots of confusion. Let’s look at a few basic points and see how you can implement TCS in your Tally.
To whom is TCS applicable?
The law says that a Seller who receives any amount as consideration for sale of any goods aggregating to 5 million Indian Rupee (INR) or more in a financial year from a buyer, at the time of receipt of such amount is required to collect tax at source (TCS) at the rate 0.1 per cent on the sale consideration exceeding INR 5 million as income-tax. In case the buyer fails to provide PAN/Aadhar, TCS shall be collected at the rate of 1 per cent.
Who is required to collect TCS?
Every seller whose total sales, gross receipts or turnover from his business exceeds INR 100 million in the immediately preceding Financial Year.
There are a few ambiguities as on date that need more clarity. These include applicability of TCS provisions on deemed exports within India to Special Economic Zone (SEZ) and Export Oriented Units, free of cost sales and warranty replacements.
There are some exclusions too. TCS would not apply to transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges. TCS on sale of goods under section 206(1H) shall not apply:
- where the buyer is required to withhold taxes and such buyer has done withholding of required amount.
- on the export of goods;
- on goods that are specifically covered under sub-section (1), (1F) or (1G) of section 206, i.e.:
- Alcoholic liquor for human consumption,
- Tendu leaves,
- Timber or any other forest produce,
- Minerals, being coal, or lignite or iron ore,
- Motor Vehicle,
- Overseas tour package.
Implement TCS in Tally.ERP 9
To begin with, you’ll first need to enable and configure TCS in Tally ERP 9. Go to Gateway of Tally > F11: Features > Statutory & Taxation
- Next, in the Company Operations Alteration screen, set Enable Tax Collected at Source (TCS) to Yes.
- After that enable the option Set/alter TCS details. The screen appears as shown below
- Enter the TAN registration number.
- Enter the Tax deduction and collection Account Number (TAN).
- Select the Collector Type.
- Enter the Collector branch/division.
- Enable the option Set/alter details of person responsible to display the Person Responsible Details screen. Enter the relevant details in the screen as shown below:
- Press Ctrl+A to save.
- Set Ignore IT Exemption Limit to:
- Yes, if you don’t want to consider the IT exemption limit.
- No, if you want to consider the IT exemption limit.
- Press Ctrl+A to save and go back to Gateway of Tally.
- Next, to configure TCS in Tally, go to Accounts Info > Statutory Info > TCS Nature of Goods > Create
- You must fill all relevant details as shown in the image below and press Ctrl+A to save
Now the important part in configuring TCS in Tally…
- After that, you need to configure your existing party masters for TCS. Press Esc twice > Ledgers > Alter Single Ledger.
- Enter the additional details relevant for TCS as shown in the image above. You have to update the party’s PAN number too if not done so earlier. This needs to be repeated for all customers from whom TCS will be collected.
- You now, have to configure your Sales Ledgers for TCS. Select your sales ledger and set Is TCS Applicable? To Applicable. In Nature of Goods, you have to select the option that you have just created in Steps 15 and 16 as shown in the images below and press Ctrl+A to save and exit. You have to repeat this for all sales ledgers on which you will be collecting TCS.
- Next step to configure TCS in Tally ERP 9 is to configure stock items for which TCS will be applicable. Got to Gateway of Tally > Inventory Info > Stock Items > Alter Single Item. Next, select the required stock item and set Is TCS Applicable? To Applicable. In Nature of Goods, you have to select the option that you have just created in the steps above and set the applicability from date as shown in the images below and press Ctrl+A to save. You must do this for all stock items for which you will be collecting TCS.
- Next is the last configuration to setup TCS in Tally. You have to create a TCS tax ledger. Go to Gateway of Tally > AccountsInfo > Create Single Ledger. You have to create a ledger under Duties & Taxes. Type of Duty/Tax must be set to TCS. Nature of good/contract/license/lease has to be set to the same option that you have created earlier.
That’s it. Now your TCS in Tally ERP 9 is setup and Tally ready for you to pass entries with TCS!
The initial configuration of TCS in Tally ERP 9 is actually pretty simple; but can be slightly time-consuming as you have to configure one by one, all stock items and all parties with whom you have a turnover of 50 lakhs in a year. The bright side of things is that this configuration is a one time process only! If you are looking for a faster way to configure TCS in your Tally, we have a readily available customized module to ease your initial TCS configuration. You can contact us and we would be happy to assist you. Alternatively, you could simply drop us a message via WhatsApp by clicking here.
You can also refer to this page on Tally Solutions’ website for some more details on how to pass entries
Some TCS FAQs
Q.1 What is the meaning of Seller under the provisions of section 206C(1H)?
Ans. Here, Seller means a person whose Total Sales, Turnover, Gross Receipts from the business being carried out by him in preceding Financial Year exceeds ₹ 10 Crores.
The term turnover has not been specifically defined in the sub-section. In the “Guidance Note on Terms used in Financial Statements” published by ICAI, “the expression “Sales Turnover” has been defined as: “The aggregate amount for which sales are affected or services rendered by an enterprise.
In the statement issued by ICAI on the CARO the word ‘turnover’ has been defined as under- “The term ‘turnover’ for the purposes of this clause may be interpreted to mean the aggregate amount for which sales are effected or services rendered by an enterprises”.
Q. 2 Whether sales consideration includes GST component?
Ans. Clarification provided by CBDT on 29th September 2020 states that “it is hereby clarified that no adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under sub section (1H) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration.” Thus, the intent is to have the TCS on sales consideration collected including GST.
Q. 3 Whether TCS to be collected on total sales value to the buyer to whom sales in excess of ₹ 50 Lakhs has been made or only to the amount in excess of ₹ 50 Lakhs?
Ans. Section 206C(1H) envisages that TCS at the rate of 0.10% of the sale consideration received in excess of ₹ 50 Lakhs shall be collected by the seller. As such, TCS shall be collected on Total Sale Value received less ₹ 50 lakh.
Q. 4 What is the meaning of the buyer?
Ans. Any person who purchases any Goods but does not include:
- the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State
- a local authority
- a person importing goods into India
Q. 5 Whether TCS shall be collected on any kind of sales including sale of services?
Ans. TCS shall be collected on sale of goods only.
Q. 6 Whether the consideration amount will be at FOB/CIF?
Ans. It would depend upon the terms of the contract. If the contract is on CIF basis, the consideration will include insurance and freight.
Q. 7 Whether TCS shall be collected on export of goods?
Ans. No, TCS shall not be collected on export sales being made outside India.
Q. 8 For calculating the limit of ₹ 10 crore in the preceding financial year, whether sale of services to be included?
Ans. For calculating the threshold limit of ₹ 10 crore in the preceding financial year, section 206C(1H) provides that Total Sales, Turnover, Gross Receipts from the business shall be considered. As such, the receipts of sale of services shall also be considered.
Q. 9 In the case of non-availability of PAN or Aadhaar of the buyer, what shall be rate at which TCS to be collected?
Ans. Section 206C(1H) specifically provides that TCS shall be collected at the rate of 1% of sale consideration in case buyer of the goods fails to provide its PAN. Provisions of section 206CC have been specifically overruled by section 206C(1H).
Q. 10 Whether TCS shall be collected at the time of debiting the buyer with the sale value or at the time of collection?
Ans. Section 206C(1H) specifically provides that the seller shall collect from the buyer a sum equals to 0.1% of the sales consideration at the time of receipt of such amount. That means the liability to collect TCS will arise even in case of advance payment received though the goods will be physically delivered at a later date.
Further, CBDT by way of press release dated 30-09-2020 has also clarified that in order to simplify and ease the compliance of the collector, it may be noted that this TCS provisions shall be applicable on the amount of all sale consideration received on or after 01-10-2020, without making any adjustment for the amount received in respect of sales made before 01-10-2020.
Q.11 Since, TCS to be collected on advance payments, what shall be the course of action in case, the advance has to be refunded as the sale is not affected?
Ans. Where the seller receives an advance for selling the goods and he deposits the TCS thereon, however later on such deal stands cancelled, in such a case, post month-end, no refund of the TCS can be made to a buyer. Even if it is collected on a higher amount, the same will be deposited with the government. The buyer can claim credit for the TCS amount while depositing Advance Tax and/or determining the final tax liability.
CBDT has also clarified that no adjustment on account of sales return or discount or indirect taxes including GST is required to be made for the collection of tax under sub-section (1H) of section 206C of the Act since the collection is made with reference to receipt of the amount of sale consideration.
Q. 12 Whether the rate of TCS shall be reduced by 25% in line with the Covid-19 relief measures announced by the government?
Ans. As part of relief measures undertaken by the Central Government on 12-05-2020, it was announced that in order to provide more funds at the disposal of the taxpayers, the rates of TDS for non-salaried specified payments such as payment for contract, professional fees, interest, rent, dividend, commission, brokerage etc. made to residents and rates of TCS for specified receipts shall be reduced by 25% of the existing rates. This reduction was made effective from 14-05-2020 up to 31-03-2021.
Therefore, in line with the same rate of TCS u/s 206C(1H) shall also be reduced by 25% i.e. rate at which TCS to be collected shall be 0.075% up to 31-03-2021.
Q. 13. Whether TCS shall be collected by the seller where the buyer is also obliged to deduct TDS on payments being made?
Ans. The second proviso to section 206C(1H) specifically provides that this sub-section shall not apply where the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.
Q. 15. Whether TCS to be collected on the amount of sale including GST?
Ans. Central Board of Direct Taxes (‘CBDT’) vide Circular No. 23/2017 dated July 19, 2017, has clarified that no tax shall be deducted under Chapter XVII-B if the GST on services is indicated separately. The above clarification issued by the CBDT covers only tax deduction under chapter XVII-B, whereas section 206C of the Act is governed by Chapter XVII-BB.
Further, the FAQ issued by the Income Tax Department on TCS provides that the “amount debited to the account of buyer or payment shall be received by seller inclusive of VAT /Excise /GST. As such, TCS to be collected on inclusive of GST.”
Further CBDT has clarified on 29th September 2020 that TCS need to be discharged on sales consideration received and no adjustment on account of GST is to be done.
Q. 14. Whether GST to be charged by the seller on the amount of sale including TCS?
Ans. Corrigendum to CBEC Circular No. 76/50/2018-GST issued on 07-03-2019 provides clarifications on certain issues that include valuation methodology in case of TCS under Income Tax Act. In this matter, it states that Section 15(2) of the CGST Act specifies that the value of supply shall include ‘any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST Laws.
Further, it clarified that for the purpose of determination of value of supply under GST, TCS under the provisions of Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax.
Q. 15. How and when to charge TCS from buyer?
- Alternative 1- The TCS can be collected by charging through invoice:
In this case, both buyer and seller need to do accounting as receivable and payable for these amounts. It may be noted that if the payment is being made in next financial year, TCS obligation may not be applicable on the seller (due to turnover threshold) or may not be applicable on buyer due to not making payments breaching ‘collection’ threshold in that financial year. In those case, one needs to keep track and write off and reconcile it with the liability.
- Alternative 2: The TCS can be collected by charging through debit note:
The logic for issuance of debit note may be that debit note to be issued at the time of payment so that it can be charged only on the eligible cases and no hassles of write off etc. (as mentioned in above points). But in that case, a specific series of debit note number may need to be used to make sure that these debit notes do not create issues in GST compliance.
Q. 16. Whether this sub-section shall also apply on sale of motor vehicle:
Ans. The provisions of sub-section (1F) of section 206C of the Act apply to sale of motor vehicle of the value exceeding ₹ 10 Lakh. Further, Sub-section (1H) of section 206C of the Act exclude from its applicability goods covered under sub-section (1F). It may be noted he scope of sub-sections (1H) and (1F) are different. While sub-section (1F) is based on single sale of motor vehicle, sub-section (1H) is for receipt above ₹ 50 Lakh during a financial year against aggregate sale of good. While sub-section (1F) is for sale to consumer only and not to dealers, sub-section (1H) is for all sale above the threshold.
In this regard it CBDT has clarified that –
- Receipt of sale consideration of motor vehicle from a dealer would be subjected to TCS under sub-section (1H) of the Act, if such sales are not subjected to TCS under sub-section (1F) of section 206C of the Act.
- In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value of ₹ 10 Lakh or less to a buyer would be subjected to TCS under sub-section (1H) of section 206C of the Act, if the receipt of sale consideration for such vehicles during the financial year exceeds ₹ 50 Lakh during the financial year.
- In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value exceeding ₹ 10 Lakh would not be subjected to TCS under sub-section (1H) of section 206C of the Act if such sales are subjected to TCS under sub-section (1F) of section 206C of the Act.
Q. 17. Whether this sub-section shall also apply to fuel supplied to non-resident airlines:
Ans. In this regard, CBDT has clarified that the provisions of sub-section (1H) of section 206C of the Act shall not apply on the sale consideration received for fuel supplied to non-resident airlines at airports in India.
Q. 18. What are the steps to be taken by business entities to get prepared for implementation of sec 206C(1H):
Ans. Some of the general steps to be taken by business entities to get ready for new compliances are as follows:
- Firstly, the seller shall check whether the provisions are applicable to it. For this, the key is the sales /gross receipts/turnover of immediately preceding financial year (i.e. sales of FY 2019-20 to be checked for applicability in FY 2020-21).
- To identify the customers from whom receipts for consideration for the sale of goods is more than ₹ 50 lacs during the year. For this, customers already breached the threshold or potential customer who may cross the threshold shall be identified.
- The entity may insert a specific line item in an invoice to charge TCS or it may charge TCS through a debit note. Further, it has to be made sure that the invoice or debit note format remains GST compliant.
- The buyer shall be intimated in advance regarding levy of TCS provisions and obligation on him to pay for TCS.
- Open a separate ledger account in books of account, to account for the TCS receivable from customer and TCS payable to Govt. A separate ledger account will help in reporting and reconciliation.
- Setup the checklist and procedure for compliance such as deposit of TCS, filing of statement and issuance of a certificate to the buyer.
FAQ Source: Taxguru