Tax to be Collected by Seller of Goods / Provider of Services in certain cases

A seller of goods or provider of services is from 1st June 2016 required to collected tax at 1% from the buyer of goods / receiver of services, if whole or part of the payment is made is cash.

Luckily this is not a blanket provision and applies only to transactions / invoices of over Rs2 lakhs for goods (including bullion) and services and Rs5 lakhs for purchase / sale of jewellery.

The 1% tax is to be collected when the cash portion is received and the tax should be collected on the full value of invoice (and not only on the cash portion)

Do note that this Rule is applicable irrespective whether the buyer or goods / receiver of services is a manufacturer, trader or the purchase is for personal use.

Exception: The seller of goods / provider of services is not obliged to collect the tax, if the buyer has deducted the tax at source from the payment being made. IN other words, the seller of goods / provider of service is not required to collect tax if the buyer of goods / recipient of service has deducted tax at source.
For example: If M/s A rendered the services to Mr Z for Rs2 lakhs and Mr Z deducts TDS on this Rs2 lakhs before making the payment to M/s A, then M/s A is required to collect TCS from Mr B.