TCS on Purchase of Goods: A Comprehensive Guide

February 23, 2023

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Table of Contents

Introduction

TCS or Tax Collected at Source is a tax that is collected by the seller from the buyer at the time of sale. It is applicable to the sale of certain specified goods and services as per the provisions of the Income Tax Act, 1961. In this blog, we will discuss TCS on the purchase of goods, including its applicability, rates, and compliance requirements.

Applicability of TCS on Purchase of Goods

TCS is applicable to the purchase of goods by a buyer from a seller whose turnover exceeds Rs. 10 crores in the preceding financial year. It is important to note that TCS is applicable only on the sale of certain specified goods, such as alcoholic liquor, tendu leaves, timber, forest produce, scrap, minerals, and certain types of scrap.

Rate of TCS on Purchase of Goods

The rate of TCS on the purchase of goods is 0.1% of the sale consideration. However, if the buyer does not furnish their PAN or Aadhaar, the TCS rate is higher, i.e., 1% of the sale consideration.

Compliance Requirements for TCS on Purchase of Goods

As a buyer, if you are liable to pay TCS on the purchase of goods, you need to fulfill certain compliance requirements. These include:

Obtaining PAN or Aadhaar: To ensure that the TCS is collected at the correct rate, the buyer needs to furnish their PAN or Aadhaar to the seller. If the buyer fails to do so, the TCS rate is higher at 1%.

Maintaining records: The buyer needs to maintain records of all purchases on which TCS is collected, including the name and PAN/Aadhaar of the seller, the amount of sale consideration, and the amount of TCS collected.

Payment of TCS: The TCS collected by the buyer needs to be deposited with the government within 7 days from the end of the month in which it was collected. The buyer also needs to file a TCS return, providing details of TCS collected and deposited during the quarter.

Exemptions from TCS on Purchase of Goods

There are certain exemptions from TCS on the purchase of goods, such as:

If the goods are purchased for personal use or consumption and not for business purposes.
If the goods are purchased for the purpose of manufacturing, processing, or producing goods, and not for trading or resale.
If the seller is a government entity, local authority, or any other specified person notified by the government.
If the goods are exported out of India, or if the buyer is located in a Special Economic Zone (SEZ) and the goods are purchased for the purpose of setting up a unit in the SEZ.

Consequences of Non-Compliance

If the buyer fails to comply with the TCS provisions, they may be subject to penalties and interest. The penalty for non-compliance can be up to the amount of TCS that should have been collected, and interest is charged at the rate of 1.5% per month or part of the month on the TCS amount that should have been collected.

Procedure for Claiming TCS Credit

As a buyer, you can claim TCS credit in your income tax return, and the same will be adjusted against your tax liability. The following is the procedure for claiming TCS credit:

Form 26AS: The buyer can check the TCS credit in their Form 26AS, which is a consolidated tax statement that shows details of tax deducted or collected at source.

Claim in Income Tax Return: The TCS credit can be claimed in the income tax return under the section “Tax Details” by filling in the details of the TCS credit.

Verification: The TCS credit claimed will be verified by the income tax department, and if found to be correct, it will be adjusted against the tax liability.

Refund: If the TCS credit exceeds the tax liability, the excess amount will be refunded to the buyer.

Conclusion

TCS on the purchase of goods is a tax collected by the seller from the buyer at the time of sale. It is applicable to the purchase of certain specified goods, and the rate of TCS is 0.1% of the sale consideration. As a buyer, if you are liable to pay TCS on the purchase of goods, you need to comply with certain requirements, such as obtaining PAN or Aadhaar, maintaining records, and depositing TCS with the government within the prescribed time limit. It is essential to understand and comply with the TCS provisions to avoid any penalty or interest.

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Frequently Asked Questions (FAQ’s)

Q1.) What is TCS on purchase of goods?

TCS on purchase of goods is a tax collected by the seller from the buyer at the time of sale, and it is applicable to certain specified goods.

Q2.) What is the rate of TCS on purchase of goods?

The rate of TCS on purchase of goods is 0.1% of the sale value.

Q3.) Which goods are covered under TCS on purchase of goods?

TCS on purchase of goods is applicable to certain specified goods such as alcoholic liquor for human consumption, tendu leaves, timber obtained under a forest lease, and scrap.

Q4.) Who is responsible for collecting TCS on purchase of goods?

The seller is responsible for collecting TCS on purchase of goods.

Q5.) Who is liable to pay TCS on purchase of goods?

The buyer is liable to pay TCS on purchase of goods.

Q6.) Is there any exemption from TCS on purchase of goods?

Yes, there are certain exemptions from TCS on purchase of goods such as if the goods are purchased for personal use or consumption and not for business purposes.

Q7.) Can the buyer claim TCS credit?

Yes, the buyer can claim TCS credit in their income tax return, and the same will be adjusted against their tax liability.

Q8.) What happens if the buyer does not pay TCS on purchase of goods?

If the buyer does not pay TCS on purchase of goods, they may be subject to penalties and interest.

Q9.) Can the buyer be audited for TCS on purchase of goods?

Yes, the buyer can be audited for TCS on purchase of goods, and therefore, it is important to maintain proper records and comply with the TCS provisions.

Q10.) Where can I find more information on TCS on purchase of goods?

You can find more information on TCS on purchase of goods on the website of the Central Board of Direct Taxes or consult a tax expert.