Head Office: Navi Mumbai Branches: Pune | Kolhapur 1

abm & associates LLP CHARATERED ACCOUNTANTS

Amendments in Tax affecting your business

SECTION 206C OF INCOME TAX ACT, 1961 CHANGES

APPLICABLE W.E.F. JUNE 1, 2016

Every person, being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery or any other goods (other than bullion or jewellery) or providing any service, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,—

i. for bullion, exceeds two hundred thousand rupees; or ii. for jewellery, exceeds five hundred thousand rupees; or iii. for any goods, other than those referred to in clauses (i) and (ii), or any service,

exceeds two hundred thousand rupees Provided that no tax shall be collected at source under this sub-section on any amount on which tax has been deducted by the payer under Chapter XVII-B.”

Example:

Mr. A sold goods of Rs. 8,00,000/- to Mr. B. Subsequently, Mr. A received Rs. 7,95,000/- from Mr. B via Cheque and the balance of Rs. 5,000/- in cash. The language used in the section suggests that TCS is applicable in case of each transaction where sale consideration exceeds 2 Lakhs, whether cash receipt exceeds such limit or not. Hence, it appears that legislature wants to cover entire transaction under tax bracket. So, Mr. A will have to collect Rs. 8,000/- from Mr. B at the time of receipt of cash towards TCS & file TCS return.

Our Comments:

The scope of the section is very wide & in order to be out of the clutches of this section, the Companies will have to increase the dependence on receipt of consideration in form of Cheque / online transfers / DD etc. Even if the customer deposits cash in Company’s Account it would still amount to cash consideration & invoke the provisions of this section.

Head Office: Navi Mumbai Branches: Pune | Kolhapur 2

abm & associates LLP CHARATERED ACCOUNTANTS

THE KRISHI KALYAN CESS, AT 0.5 PERCENT WILL BE LEVIED ON ALL

TAXABLE SERVICES EFFECTIVE JUNE 1, 2016.

The Union Budget, 2016 proposes in Finance Bill, 2016 to impose a new Cess, called the Krishi Kalyan Cess, @ 0.5% on all or any taxable services, proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. The Cess will come into force with effect from 1st June, 2016. Input Tax credit of this cess will be available for payment of this cess

So effective rate is 15%

Service Tax 14% Input Credit is available

Swatch Bharat Cess (SBC) 0.5% No input credit

Krishi Kalyan Cess (KKC) 0.5% Input credit is available against KKC only

Effective rate for

1. Builders after abatement of 30% [Service Tax + SBC] would be (14 Service Tax + 0.5 SBC+0.5 KKC) X 30% = 4.50 (3.50+0.125+0.125)

2. GTA after abatement of 25% [Service Tax + SBC] would be (14 Service Tax + 0.5 SBC+0.5 KKC) X 25% = 3.75 (3.50+0.125+0.125)

Head Office: Navi Mumbai Branches: Pune | Kolhapur 3

abm & associates LLP CHARATERED ACCOUNTANTS

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