Section 206C(1H): TCS on Sale of Goods (Seller Side — 0.1%)

What is Section 206C(1H)?

Section 206C(1H) of the Income Tax Act, effective 1 October 2020, requires SELLERS to COLLECT TCS at 0.1% on consideration received for sales of goods above ₹50 lakh from any single buyer in a financial year.

Unlike TDS (deducted from payment), TCS is COLLECTED from the buyer in addition to invoice value. So buyer pays sale value + 0.1% TCS.

Applicability — Seller side

206C(1H) applies when:

• Seller's turnover > ₹10 crore in immediately preceding FY
• AND sale to a single buyer > ₹50 lakh in current FY
• TCS at 0.1% on amount exceeding ₹50 lakh

Example: Vendor B (turnover ₹15 cr) sells ₹80 lakh worth to Buyer A in FY.

• Excess: ₹80 lakh - ₹50 lakh = ₹30 lakh
• TCS @ 0.1% = ₹3,000 collected from Buyer A in addition to sale value

When 206C(1H) does NOT apply

• Seller's turnover ≤ ₹10 crore in preceding FY
• Sale to single buyer ≤ ₹50 lakh in current FY
• Buyer is government, importing under specific provisions, or claimed exemption (Form 27C)
• Goods subject to TCS u/s 206C(1) (separate collection at higher rates)
• Buyer falls under 194Q (priority to buyer-side TDS)

Interaction with Section 194Q (priority)

If both 194Q (buyer-side TDS) and 206C(1H) (seller-side TCS) potentially apply:

• 194Q takes priority — Buyer's responsibility wins
• If buyer is deducting TDS u/s 194Q, seller does NOT collect TCS u/s 206C(1H) for the same transaction
• Coordinate with counterparty — written communication to avoid double tax

If neither applies (e.g., both have low turnover), no TDS/TCS.

TCS deposit and reporting

• Deposit: By 7th of next month (Challan 281)
• Quarterly return: Form 27EQ
• TCS certificate (Form 27D): Issue to buyer within 15 days of return filing
• Higher rate for non-PAN buyer: 5% (instead of 0.1%)
• GST treatment: TCS is collected on consideration (sale value + GST). Both buyer and seller need this in records.

Practical considerations

1. Update billing — TCS line item on invoices for applicable buyers
2. Buyer master — Track cumulative annual sales per buyer (when approaching ₹50 lakh)
3. Vendor checks — When buyer is large company (turnover > ₹10 cr), they may apply 194Q. Coordinate.
4. Receivables — Buyer pays sale value + TCS; ensure your accounting captures TCS as a liability (not income)
5. Deposit on time — Late deposit attracts 1.5% per month interest