TCS U/s 206C (1G) on Shares, Commodity contract, Motor Vehicle, Coal, Timber, Road Contract, Electricity, etc
TCS is on sale of Goods. If it is not sale of GOODS, then the TCS provision is not at all applicable. TCS is required by the seller whose turnover in the preceding financial year is exceeding Rs. 10 Cr. Further, TCS is required only from those buyer from those buyer from whom the receipt is exceeding Rs. 50 Lakh.
There are lots of issues which need to be examined with regard to the applicability of TCS on Shares, Commodity contract, Motor Vehicle, Coal, Timber, Road Contract, Electricity, etc. The same is discussed hereunder:
1. The term ‘goods’ is not defined in the Income-tax Act-1961. However, in normal common parlance, the term ‘goods’ is of wide concept. Anything which comes to the market and is salable can be considered as “Goods”.
2. The definition of the ‘Goods’ is mentioned in other law like in the Sale of Goods Act, 1930 and Central Goods and Services Tax Act, 2017.
As per Sale of Goods Act, 1930
‘Goods’ means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”
As per Central Goods and Services Tax Act, 2017:
‘Goods’ means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply”
The Sale of Goods Act, 1930 is a specific statute which deals with the ‘sale of goods’ and will have general applicability as against its definition under the CGST Act, 2017 which provides its definition with regards to its applicability on ‘supply of goods’.
In my view, the definition of the term ‘goods’ for the purpose of Section 206C(1H) need to be imported from the Sale of Goods Act, 1930 and not CGST Act.
TCS tax shall be collected from the sale consideration received from the sale of any good U/s 206C(1H) if the amount of receipt form the buyer exceeds Rs. 50 Lakh. This provision is subject to the conditions that the such sale is not otherwise liable for TDS/TCS under any other provisions of the Income Tax Act-1961. Therefore, the tax to be collected from the receipt of consideration in respect of the sale of the following:
i. Movable property;
ii. Any commodity;
iii. Shares or Securities;
v. Agriculture produce;
vii. Motor vehicle;
ix. Jewellery or bullion;
x. Art or Drawings;
xiii. Forest produce, etc.
The most talked about issue was with the transactions for purchase/sale of shares through stock exchanges or commodity exchange. In cases of transactions through stock exchange or commodity exchange, there is no one-to- one contract between the buyers and sellers and practically the compliance is not possible as the seller and buyers are unknown to each other. Considering this, CBDT has aptly clarified that provisions of this section shall not be applicable in relation to transactions in securities and commodities which are done through recognized stock exchanges or settled through recognized clearing corporations, recognized stock exchanges or recognized clearing corporations located in International Financial Service Centre (IFSC).
It may be noted that the transactions done through off market transactions are not given immunity by this CBDT circular. In my view, such off market transactions may form the part of the TCS applicability u/s 206C(1G).
The definition of ‘Goods’ as discussed above includes every kind of movable property, subject to exceptions and inclusions.
The immovable property shall not be treated as ‘goods’ and so the TCS is not applicable on the amount collected against sale of immovable property by any person.
Already, a specific provision is contained in Section 206C(1F) for the collection of tax on the sale of a motor vehicle whereby TCS is required from every buyer who pays any amount as consideration for the purchase of a motor vehicle of value exceeding Rs. 10 lakhs.
This is a specific provision as against general provision for collection of TCS on sale of goods under section 206C(1H). This general provision specifically excludes all those goods on which TDS/TCS is applicable under other sections. So, TCS on motor vehicles which is already covered under section 206C(1F) is not liable for TCS U/s 206C(1G). However, it may be noted that the old TCS provisions was applicable only if the motor value is exceeding Rs. 10 Lakh. So, if the value of a motor vehicle is less than Rs. 10 Lakh then the new provisions will be applicable if the aggregate value of receipt against such sale is exceeding Rs. 50 Lakh. This is possible in case the buyer purchases more than one motor value, say 10 Car purchased each of Rs. 6 Lakh.
As far as purchase of car by the dealer from their company is concerned, it may be noted that CBDT has Vide Circular No. 22/2016, dated 8-6-2016 has clarified that the provisions of Section 206C(1F) will not apply on sale of motor vehicles by manufacturers to dealers/distributors. In short, sale of the company to their dealer was not covered by Section 206C(1F). And so, now purchase by the dealer from their company would be liable for TCS under this new provision.
Section 206(1H) provides for the collection of tax on the sale consideration received for the sale of goods.
In State of Andhra Pradesh v. National Thermal Power Corporation (NTPC) (2002) 5 SCC 203, Supreme Court has already held that electricity is a movable property though it is not tangible. It is ‘Good’.
Also, the Custom Tariff Act has covered ‘Electricity’ under heading 2716 00 00, which also clarifies that Electricity is a commodity.
In short, broadly there is acceptance that electricity is a good. In my view, TCS could have been be applicable on the consideration received in respect of the transaction in electricity by the electricity company. However, CBDT has clarified that the transaction in electricity, renewable energy certificates and energy-saving certificates traded through power exchanges registered under Regulation 21 of the CERC shall be out of the scope of TCS under this provision. However, TCS shall be required to be where electricity is purchased directly from electricity generation companies.
Already, a specific provision is contained in Section 206C(1) for the collection of tax on the sale of coal. This is a specific provision as against general provision for collection of TCS on sale of goods under section 206C(1H). This new general provision specifically excludes all those goods on which TDS/TCS is applicable under other sections. So, TCS on coal which is already covered under section 206C(1) is not liable for TCS U/s 206C(1G).