In order to reduce the cash transactions in sale of goods and services, the Finance Act 2016 has expanded the scope of section 206C(ID) to provide that the seller shall collect tax @1% from the purchaser on sale in cash of any goods (other than bullion and jewellery) or providing of any services (other than payment on which tax is deducted at source) exceeding two lakh rupees.
Further, with a view to bring high value transactions within the tax net, it has been provided in sub- section (1F) of section 206C that the seller, who receives consideration for sale of a motor vehicle exceeding ten lakh rupees, shall collect 1% of the sale consideration as tax from the buyer.
In this regard a number of queries have been received about the scope of the provisions of TCS and the procedure to be followed. In this backdrop the CBDT now clarifies following issues in form of questions and answers as follows:
Question 1: Whether TCS @ 1 % is on sale of Motor Vehicle at retail level or also on sale of motor vehicles by manufacturers to dealers/distributors?
Answer: To bring high value transactions within the tax net, section 206C has been amended to provide that the seller shall collect the tax @ 1% from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees. This is intended to cover all transactions of retail sales and, accordingly, it will not apply to sale of motor vehicles by manufacturers to dealers/distributors.