Introduction:
As per the provisions of Section 206C,
tax is required to be collected at source by the seller at the specified rate
on certain goods like alcoholic liquor, tendu leaves, scrap etc. at the time of
sale of such good. This is done in order to collect tax at the earliest point
of time and to ensure more transparency in the system.
Existing Provisions:
■ Under
the existing provisions of the ITA, tax is required to be collected at source
by the seller, at the specified rates, from the buyer of certain goods like
alcoholic liquor, tendu leaves, scrap etc.
■ Such
tax has to be collected at the time of debiting of the amount receivable from
the buyer or at the time of receipt of such amount from the said buyer in cash
or by the issue of a cheque or draft or by any other mode, whichever is
earlier.
Finance Bill 2012 proposes the
following Amendments in Section 206C of ITA (w.e.f 1 July 2012):
1. TCS on sale of certain minerals:
■ It is
proposed that TCS provisions shall be made applicable on sale of minerals
being coal or lignite or iron ore at the rate of 1%. In
other words, seller of minerals being coal or lignite or iron ore shall
be required to collect TCS @1% at the time of debiting the amount receivable
from the buyer or at the time of receipt of such amount from the said buyer in
cash or by the issue of a cheque or draft or by any other mode, whichever is
earlier
However, the seller shall not collect
tax on sale of the said minerals if the same are purchased by the buyer for
personal consumption.
2. TCS on cash sale of bullion
and jewellery [Sub-section (1D) to Section 206C]
■ It has
been proposed that the seller of bullion and jewellery shall, at the time of receipt
of such amount in cash, collect tax at the rate of 1% of sale consideration
from every buyer of bullion and jewellery, if sale consideration exceeds two
lakh rupees.
■ Any
person collecting any amount under this sub-section shall also pay within the
prescribed time the amount so collected to the credit of the Central Government
or as the Board directs
■
"jewellery" shall have the meaning assigned to it in the Explanation
to sub-clause (ii) of clause (14) of section 2
■ As per
Memorandum Explaining the provisions of Finance Bill 2012, this amendment is
being proposed to reduce the quantum of cash transaction in bullion and
jewellery sector and for curbing the flow of unaccounted money in the trading
system of bullion and jewellery. It is further provided in the Memorandum that
the provisions of TCS would apply irrespective of the fact whether buyer is a
manufacturer, trader or purchase is for personal use.
3. A proviso to Sub-section (6A) has
been inserted in the proposed Finance Bill that any person (other than a person
required to collect tax on cash sale of bullion and jewellery) responsible for
collecting tax, who fails to collect the whole or any part of the tax on the
amount received from a buyer shall not be deemed to be an assessee in default in
respect of such tax if such buyer—
a. has furnished
his return of income under section 139;
b. has taken
into account such amount for computing income in such return of income; and
c. has paid the
tax due on the income declared by him in such return of income,
and the person furnishes a certificate
to this effect from an accountant in such form as may be prescribed.
"accountant" shall have the
meaning assigned to it in the Explanation to sub-section (2)
of section 288;
4. A proviso to Sub-section (7) has
been inserted to the effect that in case any person (other than a person
required to collect tax on cash sale of bullion and jewellery) who fails to
collect the whole or any part of the tax but is not deemed to be an assessee in
default under the first proviso of sub-section (6A), the interest shall
be payable from the date on which such tax was collectible to the date of
furnishing of return of income by such buyer.
Analysis:
1. Mining sector is an important
segment of Indian economy but the trading of minerals remained largely
unregulated resulting in non-reporting or under-reporting of trading in
minerals trading transactions for the taxation purpose.
The proposed amendment with respect to
Tax collected on sale of certain minerals has been proposed in order to collect
tax at the earliest point of time and also to improve reporting mechanism of
transactions in mining sector.
2. The insertion with respect to Tax
collected on sale of bullion and jewellery has been proposed in order to curb
the rampant use of unaccounted money in bullion and jewellery sector. The
proposed amendment would result in checking the use of unaccounted money in
this sector and result in adequate reporting and minimizing of tax evasion.
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