What is TCS(Tax collected at source)?

What is TCS(Tax collected at source)?

What is TCS? 
 
'Tax collected at Source' is abbreviated as TCS. It was applicable for Sale of Goods for items like Tendu leaf, motor Vehicles, Scrap..etc. From 1st October 2020, TCS will be applicable on 'Sale of Goods' for all items.
 
Both TDS & TCS are Part of Income Tax (not related to GST). TDS (Tax Deducted at Source), was implemented long back and it is applicable for Salary, Winning from Prize money and all kinds of service incomes.

The TDS will be deducted & paid by the payer. TDS deducted from the payer's invoice by the business who receives the service will be filed to the government.
But TCS will be collected & paid by the PAYEE. (Payer - Person who is receiving the goods/service,
Payee - Person who is providing the goods/service and is Income to the person)
 
From when will 'TCS on Sale of Goods' is applicable?

'TCS on Sale of Goods' is applicable with effect from 1st October 2020.

For Whom, TCS will be applicable?
 
Any owner having a total turnover exceeding Rs 10 crore in the financial year preceding the year in which the sale is made.
That is, if the total turnover exceeds Rs 10 crore in FY 2019-20, then this TCS would apply to that business in the current year, ie FY 2020-21.
 
TCS will be collected from the person whose annual business value with a business entity exceeds 50 lakhs.  TCS will be collected at the time of receipt of consideration for the sale of goods.
 

Is there any exemption  in TCS?
 
Yes. TCS is not applicable for Export sales. Sale of goods to Central Government, State Government, Embassy, High Commission, Legation, Commission, Consulate, Trade representations of Foreign State, Persons importing goods into India, or Local Authority or any other person as may be specified by the Central Government
 
What is the TCS rate?
 
TCS rate is 0.1%. Already for all existing TDS rate, the 25% reduction (till 31st March 2020) is given as part of Covid-19 relief. So, in TCS also it is applicable and the TCS rate is 0.075 up to 31 st March 2020.
 
TCS rate if 1% if the Party's PAN number is not given.
 
How to calculate TCS?
 
TCS to be collected at a rate of 0.1% of the amount exceeding Rs 50 lakhs. Ex: if a party made business with a business of 45 lacs till 30th September, that Party makes the business of Rs.10 lacs on 5th October. So, TCS should be calculated for 5 lacs @ 0.1% i.e 500 Rupees
Assume in another case that a person made a business of Rs.70 lakhs up to 30th September. On 5th October, he makes the business of Rs.10 lacs. Then TCS should be calculated for 10 lacs only @ 0.1% i.e 1000 Rupees.