Collection of tax at source


There is provision for realization of tax at source just like deduction of tax at source in Income tax statute. If the seller of notified goods while making entry of sale in Account books or while receiving the payment for the same, whichever is earlier should realize the tax at source from the buyer. The tax at source is realized on sale of following goods:-

Man made liquor
Tendu Leaves
Timber obtained from leased forest
Timber obtained from sources other than lease
Forest products other than Tendu leaves and Timber
Parking lot, Toll plaza, Mining & Exploration
Mineral (Applicable on Coal, Lignite and Iron Ore From 1, July, 2012)
If the cost of bullion is not more than Rs. 2 lakhs or the jewellery is for more than Rs. 5 lakhs applicable from 1, July, 2012

Definition of Buyer:

Buyer is a person who buys goods through Auction, Tenders or in any other manner. If goods are bought through auction or by submitting tender or in any other manner then the provision for realization of tax at source are applicable. However these provisions will not be applicable in following two categories of buyers:

i) A public sector company known as Government company, Central Government, State Government, Embassies, High Commissions or any representative of a foreign Country and Club.

ii) Any buyer who buys goods for self-use and the purchase is made under retail sale.

Prior to the amendment of 2003, the provisions for realization of tax were applicable only on those goods which were bought through auction or the rates which were decided by the government. However, after the amendment of 2003, except aforementioned two categories of buyers, tax is realizable from any kind of purchase of abovementioned goods. Now, even if the goods are not bought through auction or tender these provisions are applicable.

Definition of Seller:

Corporations established under State Statue, Companies, Firms, and Co-operative societies, Central Government, State Government, and Local Authority are included in the definition of Seller. Those individuals and HUF whose previous year sales exceed sale specified in section 44AB i.e. over Rs. 60 lakhs are also included in it. Thus almost all sort of dealers are included in the definition of seller. Those assesses who have to pay tax on profit calculated at specific rates u/s.44AD and 44AE are exempted from this provision.

These provisions are also applicable on Lease:

If any person leases, licenses or contracts with any other for any parking lot, toll plaza or mines for business purpose then the provisions for realization of tax at source is applicable. These provisions will not apply if such lease license of contract is given to any public sector company. These provisions will also not be applicable on Mineral oil including Petroleum & Natural Gas. Tax at source @ 2% will be realized from parking lot, toll plaza and mining.

When TCS deduction is not necessary:

If the sale of goods is for production, processing or manufacturing and not for trading then there will no need for seller to realize tax at source from the buyer. It means that the provisions of TCS will not apply on such transactions. But for this seller will have to obtain a certificate in form 27 from the buyer to this effect. This certificate is obtainable in duplicate and one copy of it should be filed with the office of Chief Commissioner by seventh of subsequent month. These provisions are as per rule 37G.

TCS to be realized at reduced rate:

If any buyer of the goods considers that for any assessment year the deducted TCS shall exceed payable Income Tax then he can apply to relevant assessing officer in form 13 to deduct TCS at reduced rate. If the assessing officer is satisfied with it then he will issue a certificate on plain paper and the seller will then deduct TCS accordingly. These provisions are as per rule 37G.

TCS Account Number:

A common Account number is issued for TCS and TDS. If any assessee has not got TDS number then he may apply for TCS number in Form 49B. The provisions regarding this are made u/s. 203A.

Provision regarding return etc.:

All provisions relating to filing of return and depositing of TDS apply on TCS. TCS certificate is also issued for this. These provisions are same as provisions for TDS.

Interest and Penalty:

All provisions pertaining to interest and penalty regarding TDS apply on TCS.

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