TAX COLLECTION AT SOURCE ON SALE OF GOODS FOR MORE THAN 50 LACS @ 0.1% OF SALE VALUE


The Finance Bill, 2020 requiring every seller (whose previous year turnover exceeds Rs.10 crore) to collect tax at source (TCS) at the rate of 0.1% of the sale consideration exceeding Rs.50 lakhs in respect of sale of any goods. If there is no PAN or Aadaar, then the TCS Rate would be 1%.

In simple sense, It means that if your are buying any goods from big seller (Turnover more than 10 Crore), then you will be charged TCS 0.1% on the Invoice and same would be credited to your PAN account and same would reflect in Form 26 AS. The same tax can be taken credit in your income tax return. The effect / intent of this amendments is that all your significant purchases of yours would be reported to income tax authorities. This would keep a check on tax evasion on small business in B2C business. But, already all these transactions were getting reported through GST returns. All business were already heckled with GSTR-2A Reconciliation. Now, what is the purpose of this provisions ??? 
Question is >> Did Tax process was simplified ??

Still there are few clarifications required from the government on whether this provision would apply on aggregate manner or each transaction wise. Also, whether there would be any exemption given for export shipments. Because tax rate mentioned for non-PAN case was 1%. The Government should not expect us to collect TCS on export shipment from Foreign buyers. 

Case study : Take the case of a milk, vegetable, cereals traders/distributors. A Local Grocery Shop Vendor will be buying its regular supplies from Big Corporates like ITC / Pataanjali / Nestle / P&G. These purchases in the year are bound to be more than Rs. 50 lakhs and now, under this proposed law, the these companies will be levying TCS at the rate of 0.1 %. 

The implication can be understood with another example of Oil Company like Indian Oil Corporation. With a turnover of about Rs.6 lakh crore, it will be collecting TCS from each of its distributor to whom it is supplying oil and the supply of the oil to each of its distributor will exceed Rs.50 lakhs. Then the distributor will further make the sale to the wholesaler. The distributor then will collect TCS from the whole seller and on each invoice, there will be a separate charge of TCS like GST. The wholesaler on its part will sell to the petrol pump dealer and in turn will levy TCS on each of the invoice raised on the petrol pump dealer. The purchase of each petrol dealer is more than Rs.50 lakhs. In this process, on each and every subject of the transaction, the TCS will get collected. This will have huge impact not only on the paper work compliance obligation but will also have serious impact on the working capital. In many of the businesses, the margins are less than 1-2%. 


The GST having been introduced and there being a complete trail available particularly in respect of the transaction which aggregates Rs.50 lakhs or more, there is no justification to introduce this provision so as to increase the compliance obligation on the trade which otherwise is finding difficult to cope with the compliance provisions under the GST Law. Contrary to Salient features of the Finance Bill, 2020 by introducing such obligation, there is a need to consolidate the compliance under the various statute. The information available under one statute should be used in the other statute rather than asking that information again in the other statute. It will be ideal that tax returns under the various laws are integrated and businessman is required to submit one consolidated return rather than filing so many returns. It appears that while drafting this provision, one has not considered the volume of work and the manpower required for compliance of goods of such provision. This amendment shall be effective from 01.04.2020 and as such tax shall be required to be collected under this provision from 01.04.2020 

It would be helpful & enlightening, if FM can explain how this budget simplifies the taxation system? Stop Blaming Opposition. It's time to review yourselves. This government is spoiling the business environment with the new provisions that are Mad (This is not to be called as Arrogant; Its only Mad). 

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