TCS on Sale of Goods: Section 206C(1H) and How It Interacts with TDS
Rohit Menon
· Founder & Product Architect· 3 min read
Two provisions can apply to the same transaction: the seller collecting TCS under 206C(1H) and the buyer deducting TDS under 194Q. Only one actually applies, and knowing which avoids both double compliance and a gap.
- ✓Applies to sellers with turnover above ₹10 crore in the preceding year.
- ✓Collected at 0.1 per cent on consideration exceeding ₹50 lakh per buyer per year.
- ✓Section 194Q TDS by the buyer takes precedence where both could apply.
- ✓No PAN means one per cent instead of 0.1.
When TCS applies
A seller whose total sales, gross receipts or turnover exceeded ten crore rupees in the preceding financial year must collect tax at 0.1 per cent on consideration for sale of goods exceeding fifty lakh rupees received from a buyer during the year.
The trigger is receipt of consideration, not the sale itself, which means the collection follows the money rather than the invoice.
The interaction with Section 194Q
Section 194Q requires a buyer with turnover above ten crore rupees to deduct 0.1 per cent on purchases exceeding fifty lakh rupees from a seller.
Where both could apply, Section 206C(1H) expressly steps back: TCS is not collected if the buyer is liable to deduct under 194Q and has done so. In practice the buyer's obligation prevails, and sellers should obtain a confirmation from large buyers about whether 194Q is being applied.
Rates and PAN
The rate is 0.1 per cent where the buyer furnishes a PAN, and one per cent where they do not, under Section 206CC. Higher rates apply to specified non-filers under Section 206CCA.
Collection is on the amount exceeding fifty lakh rupees, not on the whole consideration, which is a useful difference from most TDS thresholds.
Compliance
Tax collected is deposited by the seventh of the following month and reported quarterly in Form 27EQ. A certificate in Form 27D is issued to the buyer, who claims credit in their return.
Because the obligation depends on the previous year's turnover, it switches on and off between years for businesses near the threshold, which needs checking each April rather than assuming continuity.
Frequently asked questions
### Who collects TCS on sale of goods?
A seller whose turnover exceeded ten crore rupees in the preceding financial year, on consideration exceeding fifty lakh rupees received from a buyer during the year, at 0.1 per cent.
### What if both 194Q and 206C(1H) apply?
Section 194Q takes precedence. Where the buyer is liable to deduct TDS and does so, the seller does not collect TCS. Obtaining written confirmation from large buyers avoids both parties acting.
### Is TCS collected on the whole invoice value?
No, only on the amount exceeding fifty lakh rupees in the financial year for that buyer. This differs from most TDS provisions, where crossing the threshold brings the whole amount into charge.
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Frequently Asked Questions
Who collects TCS on sale of goods?
A seller whose turnover exceeded ten crore rupees in the preceding financial year, on consideration exceeding fifty lakh rupees received from a buyer during the year, at 0.1 per cent.
What if both 194Q and 206C(1H) apply?
Section 194Q takes precedence. Where the buyer is liable to deduct TDS and does so, the seller does not collect TCS. Obtaining written confirmation from large buyers avoids both parties acting.
Is TCS collected on the whole invoice value?
No, only on the amount exceeding fifty lakh rupees in the financial year for that buyer. This differs from most TDS provisions, where crossing the threshold brings the whole amount into charge.
Rohit Menon
Founder & Product ArchitectArchitecting business document operating systems and automated billing workflows for Indian SMBs, agencies, and enterprises.