If you are a seller dealing with high-value goods, you might be familiar with TCS on the sale of goods under Section 206C(1H) of the Income Tax Act. But big news: From April 1, 2025, this provision is gone!
Let’s break down what TCS on the sale of goods meant, how it worked, & what its removal means for businesses. “
What Is TCS on the Sale of Goods?
TCS (Tax Collected at Source) is a tax collected by a seller from the buyer at the time of sale of specified goods & deposited to the government.
This provision was introduced under Section 206C(1H) & applied when:
- The seller's total turnover exceeded ₹10 crores in the previous financial year
- The sale of goods to a particular buyer exceeded ₹50 lakhs in the same year
So, for example, if a seller had a turnover of ₹12 crores last year & sells ₹80 lakhs worth of goods to a buyer, they were required to collect TCS at 0.1% (or 1% in certain cases) on the amount exceeding ₹50 lakhs. “
Key Rule: Only the Sale of Goods Is to Be Considered
It’s important to understand that this provision ONLY applies to the sale of goods. It excluded services, exports, & GST components.
Whether it was raw materials, finished products, or luxury items, TCS on the sale of goods meant that a seller had to collect tax on the sale consideration, not the profit.
TCS on Sale of Goods Rate
Here’s a quick breakdown of rates as per the old rule:
- 0.1% TCS on the value above ₹50 lakhs
- 1% TCS if the buyer failed to provide PAN/Aadhaar
This applied to domestic transactions only.
Example: TCS on Sale of Goods Above 50 Lakhs
Let’s say:
- You sold goods worth ₹75 lakhs to a buyer.
- ₹25 lakhs exceeds the threshold of ₹50 lakhs.
- TCS at 0.1% on ₹25 lakhs = ₹2,500
You would collect ₹2,500 from the buyer & deposit it to the IT department.
6Cr or 6Ce Confusion?
You might have seen discussions around 6cr TCS on the sale of goods or 6ce. These often referred to changes in TCS compliance limits during budget announcements or new clause codes in e-filing software, but the legal threshold remained ₹10 crore turnover & ₹50 lakh sale per buyer.
Section 206C(1H): Applicability and Notification
Introduced in FY 2020–21, Section 206C(1H) applied to sellers of all goods, except:
- Exports
- Imports
- Sale to government departments
It was notified by CBDT through official circulars, & businesses had to update their invoicing & ERP systems to accommodate this collection.
Turnover Limit for TCS on Sale of Goods
Let’s clarify again:
- Turnover limit: ₹10 crore in the preceding financial year
- Sale threshold per buyer: ₹50 lakh
- Rate: 0.1% on sale above ₹50 lakh
If you had multiple buyers under ₹50 lakhs, TCS did not apply to them.
TCS on Sale of Goods for FY 2025–26: Major Change
Here comes the most important update for taxpayers:
❌ From April 1, 2025: This provision has been removed
Yes, you read that right.
The government has scrapped TCS on the sale of goods completely. Businesses are no longer required to collect TCS on the sale of goods from FY 2025–26 onwards.
The move is expected to:
- Reduce the compliance burden for businesses
- Simplify invoicing and accounting
- Promote ease of doing business in India
TCS on Account of Sale of All Goods: Is It Gone Forever?
As of now, yes. The TCS on account of the sale of all goods, as governed by Section 206C(1H), is no longer applicable after March 31, 2025.
But remember:
- TCS on luxury goods like cars above ₹10 lakhs, jewellery, etc., may still be applicable under other clauses
- So this removal only applies to the general sale of goods under 206C(1H)
TCS vs. TDS on Sale and Purchase
Some businesses also confuse TCS on the sale of goods with TDS on the purchase of goods (under Section 194Q). While 206C(1H) is removed, TDS under 194Q may still apply.
So, if you’re a buyer purchasing goods over ₹50 lakhs & have a turnover of over ₹10 crore, you may still need to deduct TDS.
Always check applicability before skipping tax compliance.
Final Thoughts
The TCS regime under Section 206C(1H) may have been complex & temporary, but it taught businesses to track turnover, buyer limits, & compliance more carefully.
Let’s recap the major points:
- TCS on the sale of goods was applicable under Section 206C(1H)
- Turnover limit was ₹10 crore; buyer threshold was ₹50 lakh
- TCS was collected at 0.1% or 1%
- ONLY SALE OF GOODS was considered (not services)
- From April 1, 2025, this provision will be officially removed
👉 For expert compliance support or to understand your TDS-TCS obligations for FY 2025–26, visit www.callmyca.com.
