CBDT vide Circular No. 23/2016 dt.
24 June 2016 has clarified on FAQs of stakeholders reg. scope of the provisions
and the procedure to be followed in case of the amended provisions of Section
206C of the Income Tax Act, as under:
CBDT Circular No. 23/2016 dt. 24
June 2016
In order to curb the cash economy,
Finance Act 2016 has amended section 206C of the Income-tax Act to provide that
the seller shall collect tax at the rate of one per cent from the purchaser on
sale in cash of certain goods or provision of services exceeding two lakh
rupees. Subsequent to the amendment, a number of representations were received
from various stakeholders with regard to the scope of the provisions and the
procedure to be followed in case of the amended provisions of Section 206C of
the Act. The Board, after examining the representations of the stakeholders,
issued FAQs vide circular.No.22/2016 dated 8th June, 2016. The
Board has further decided to clarify the issue as regards applicability of the
provisions relating to levy of TCS where the sale consideration received is
partly in cash and partly in cheque by issue of an addendum to the above
circular in the form of question and answer as under:
Question 1: Whether tax collection
at source under section 206C(1D) at the rate of 1% will apply in cases where
the sale consideration received is partly in cash and partly in cheque and the
cash receipt is less than two lakh rupees.
Answer : No. Tax collection at source will not be levied if the cash
receipt does not exceed two lakh rupees even if the sale consideration exceeds
two lakh rupees.
Illustration: Goods worth Rs. 5
lakhs is sold for which the consideration amounting to Rs.4 lakhs has been
received in cheque and Rs.1 lakh has been received in cash. As the cash receipt
does not exceed Rs.2 lakh, no tax is required to be collected at source as per
section 206C (1D).
Question 2: Whether tax collection
at source under section 206C (1D) will apply only to cash component or in
respect of whole of sales consideration.
Answer: Under section 206C (1D), the tax is required to be
collected at source on cash component of the sales consideration and not on the
whole of sales consideration.
Illustration: Goods worth Rs. 5
lakhs is sold for which the consideration amounting to Rs.2 lakhs has been
received in cheque and Rs.3 lakh has been received in cash. Tax is required to
be collected under section 206C (1 D) only on cash receipt of Rs.3 lakhs and
not on the whole of sales consideration of Rs.5 lakh.
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