KB12: TCS on Goods Sold: Section 206C(1H)

What is TCS Section 206C (1H)? 

As per Finance Act 2020, Section 206C(1H) will be applicable from 1st October 2020 –  

Provision of Section 206C: (1H) Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax*. 

What are the challenges to be faced by businesses because of the above rule? 

There are still some open areas that require clarification. For instance, the issue whether TCS is to be applied on total invoice value including or excluding GST; the impact on TCS on partial recovery of invoice, i.e. whether TCS will be assumed to be included in the part amount received against any invoices. Whether TCS will also apply on sales made on or before 30 September 2020, although sales consideration has been received on or after 1 October 2020 etc. would require deliberation. 

So, the taxpayer will be required to make necessary changes in the invoice/receipt vouchers to facilitate the TCS collection. Changes in the ERP/accounting software package and standard operating procedure may also be considered to keep a check on threshold, receipt, etc. 

 What is Dhyey offering as assistance to tackle the issues? 

Microsoft has come up with a brilliant solution by releasing CU59 to tackle the TCS rule and Dhyey (with our custom add-ons building capabilities) can help any business with the integration of the solution to the business’s invoice calculation for their clients. 

*there are exceptions to the case. 

TCS Setup:

• First, Set TCS Threshold Amount Limit in below Setup (Currently we set: 1,00,000.00)
• We Click on Calc. Over & Above Threshold for TCS (206C)

NOD/NOC: Left Blank Threshold Overlook:

Sales Invoice: Statistics

Example Scenario Explanation

CU59 TCS- 206C
Doc No	Base Amount	GST	Amount including GST	Threshold Limit	TCS Status
1	50,000.00	9,000.00	59,000.00	100,000.00	Not Calculated TCS
2	50,000.00	9,000.00	59,000.00	100,000.00	TCS Calculated As per Below Conditions

Doc No: 1 Can’t calculate TCS Because of Amount including GST under the Threshold Limit                     (Rs. 1,00,000).

Doc No: 2 Calculate TCS based on below formula

TCS Amount= Threshold Limit – (Doc No: 1 Amount including GST +  Doc No: 2 Amount including GST)

18,000 = 1,00,000.00 – (59,000.00 + 59,000.00)

Sales Invoice: Preview Posting

Based on above analysis, System will generate below entries while posting Doc No 2

Microsoft has come up with a brilliant solution by releasing CU59 to tackle the TCS rule.
At Dhyey, we can update your current platform to latest CU. We can demonstrate end-to-end TCS solution for your business.
Let us know if you willing to see TCS solution.

If your company is looking for ERM services in Vadodara or anywhere around the globe, drop an email to enquiry@dhyey.com and our team will be glad to set up a free demo for your brand!