Does TCS on sale of goods still apply under 206C(1H)?

Does 206C(1H) still apply?

No. Section 206C(1H) TCS on sale of goods stopped applying from 1 April 2025. Section 72(c) of the Finance Act, 2025 inserted a proviso into sub-section (1H) reading that nothing contained in the provisions of that sub-section shall apply from the 1st day of April, 2025. Sales on or after that date carry no 206C(1H) collection.

While it ran, section 206C(1H) was a collection mechanism layered on ordinary sales, not a tax on the seller's income. It made a large seller collect a small amount from the buyer and pass it to the government, so high-value goods transactions left a trail.

Who collected TCS on goods, and when?

A seller whose total sales, turnover or gross receipts in the preceding financial year exceeded ₹10 crore collected 206C(1H) TCS from a buyer, once receipts from that buyer in the financial year crossed ₹50 lakh. That duty ended for sales from 1 April 2025.

Because the trigger was receipt of consideration, the collection point was not the invoice date. That matters for the cutover: money received on or after 1 April 2025 against a March 2025 invoice falls outside 206C(1H), because the sub-section no longer applies on the date the receipt lands.

What were the 206C(1H) thresholds?

₹10 crore of seller turnover in the preceding year, and ₹50 lakh of receipts from one buyer in the year, with 0.1 per cent collected on the consideration above the ₹50 lakh line rather than on the whole amount. Both lines are stated in the memorandum to the Finance Bill, 2025.

Is any other part of section 206C still live?

Yes. Only sub-section (1H) stopped. Section 206C(1) still applies to the listed items, and the Finance Act, 2025 widened serial number (iii) to "timber or any other forest produce (not being tendu leaves)" and cut those rates from 2.5 per cent to 2 per cent. Section 206C(1G) on foreign remittances continues, with its threshold raised from ₹7 lakh to ₹10 lakh, and an education loan from a section 80E financial institution excluded.

Why did 206C(1H) clash with 194Q?

Both provisions hit the same goods transaction, and the seller could not tell whether the buyer had already acted. Section 206C(1H) said the collection did not apply where the buyer was liable to deduct under another provision and had deducted. The memorandum to the Finance Bill, 2025 records the representations: sellers could not verify buyer compliance with section 194Q, so TDS and TCS both landed on one sale.

Removing 206C(1H) leaves one obligation. Section 194Q still makes a buyer with turnover above ₹10 crore deduct 0.1 per cent on purchases from a resident seller above ₹50 lakh in the year. Section 69 of the Finance Act, 2025 also deleted the words in section 194Q(5)(b) that carved out a transaction to which 206C(1H) applied, because there is no longer such a transaction to carve out. The buyer-side rule is set out in the 194Q guide.

What TCS on goods is still open?

TCS collected on receipts up to 31 March 2025 stays payable and reportable. It is deposited under rule 37CA, reported in the quarterly statement in Form 27EQ, and certified to the buyer in Form 27D. Turning the collection off prospectively does not clear a past-period obligation.

Late deposit carries interest under section 206C(7). A late Form 27EQ carries the section 234E fee of ₹200 a day. If a 27EQ for a quarter ending on or before 31 March 2025 is still open, close it rather than assuming the omission covers it.

How do I confirm 206C(1H) is off?

1. Read section 72(c) in the Finance Act, 2025. It inserts the proviso into section 206C(1H) that stops the sub-section from 1 April 2025.
2. Read paragraph XIII of the memorandum to the Finance Bill, 2025, which states the reason and confirms the ₹50 lakh and 0.1 per cent figures that applied before.
3. Check the date of receipt on each open item. Receipts up to 31 March 2025 are inside 206C(1H); later receipts are not.
4. Confirm the buyer's section 194Q position, which now stands alone on a goods purchase.
5. Scan CBDT circulars for anything later that touches section 206C, and save it with the working papers.

Why do sellers still collect this TCS?

• The ERP TCS flag was never switched off after 1 April 2025, so 0.1 per cent keeps appearing on invoices for a collection that no longer exists.
• Reading the change as an omission of the whole of section 206C, when only sub-section (1H) stopped and 206C(1) and 206C(1G) continue.
• Treating the invoice date as the cutover instead of the date of receipt of consideration.
• Leaving a pre-April 2025 Form 27EQ unfiled on the view that the provision has gone, and collecting the ₹200-a-day section 234E fee.
• Assuming section 194Q also went. It did not; the buyer still deducts 0.1 per cent above ₹50 lakh.

Where are TCS rate changes notified?

Changes to section 206C arrive in the annual Finance Act and in CBDT circulars, as the 1 April 2025 stop on sub-section (1H) and the cut in the forest-produce rate to 2 per cent both did. Complied AI keeps CBDT / Income Tax updates in one feed so a seller can open the amending document itself rather than trusting an ERP tax master that was configured before the change.