Effect of new section of TCS on general goods sale

Finance Act- 2020 has introduced new section no. 206C (1H) which is related to applicability of TCS @ 0.1% on all general sale of goods excluding export as well as some specific items plus those goods sales which are already covered under TCS / TDS under different section.

A good source to generate extra tax revenue. Since the tax rate is very little i.e. only 0.1% (upto 31st March, 2021 it is at reduced rate at 0.075%) so against Rs. 10,000 sale collection TCS liability is only Rs. 10 which is almost negligible. But if we think carefully, this is an another efforts of the central government to widen the Direct Tax area into the core domain of Indirect Tax, collecting tax on sale of goods or service is the core domain of Indirect Tax but starting from TDS deduction then TCS on scrap and other items and now TCS on all general sale of goods.

Actually increase in indirect tax to raise tax revenue is not advisable at all time, because due to the cascading effect and due to loss of input tax credit at some point, ultimately the product price will increase and hence it will affect to the common people of the country. But in the case of direct tax collection the tax payer is getting full tax credit of the tax paid amount in its tax liability. But the point is, does that necessary to impose TCS on all goods? And that too it covers all the industries which is having turnover beyond 10 crore, that means almost 60-70% of the Indian industry is covered under this tax regime.

Ideally it can be impose on specific goods like luxury items, or it can be impose on the industries beyond 100 crore turnover, something like that, which will cover the top most wealthy product or industries only.

There are some other issues also. Like deducting TDS from payable amount is also easy and one can comply the same. But collecting TCS is not in the hand of the seller and in case of default of receipt of TCS in part or full amount, it is ultimately the seller responsibility to pay TCS in favor of buyer. Also as on date 1st Oct, 2020 outstanding whatever money received from buyer will also attract TCS as per plain reading of the rule. But no buyer will pay the TCS amount which is not charged in bill.

So the industry is expecting some more clarifications against the noted and some more issues related to the new TCS applicability from CBDT.

What can’t our Indirect Tax system can be as smooth as Direct Tax? Why can’t Indirect tax system will be so simple that there will be no cascading and loss of Input Tax credit issue at any level and for any product or service for any industry? This is my dream about the Indian tax structure and I am sure it is the vision of our respected PM Shri Narendra Modi also. After all the kind of tax evolutions he is bringing in the country, are remarkable. So let’s hope for the best and stand with the government efforts.