What is the amended bare act provision of Section 206C(1F)?

Understanding TCS on Sale of Luxury Goods and Motor Vehicles Section 206C(1F)

The Finance (No. 2) Act, 2024 has replaced the previous subsection (1F) of Section 206C w.e.f. January 1, 2025, and as amended now reads:
“(1F) Every person, being a seller, who receives any amount as consideration for the sale of:

(a) a motor vehicle; or
(b) any other goods, as the Central Government may, by notification in the Official Gazette, specify, of the value of more than ten lakh rupees shall, on receipt of such amount, receive from the buyer an amount equal to one percent of the sale consideration as income tax.

This change means TCS will now also be collected on luxury items (not just cars) that cost over Rs. 10 lakh.

What are the essential points about applicability and provision of Section 206C(1F)?

Understanding TCS on Sale of Luxury Goods and Motor Vehicles Section 206C(1F)

The TCS rule applies to

Motor vehicles: From June 1, 2016
10 listed luxury goods: From April 22, 2025

Under this subsection, TCS at 1% is to be borne by sellers on receipt of consideration in the amount of more than Rs. 10 lakh on sale of:

Motor vehicles
Any of the ten luxury items noted, including

1. Wristwatch
2. Art pieces, including antiques, paintings, and  sculptures
3. Collectables like coins and stamps
4. Yachts, rowing boats, canoes, and helicopters
5. Sunglasses
6. Bags like handbags and purses, Shoes
7. Sportswear and accessories like golf kits and skiwear
8. Home theatre systems
9. Horses used for racing in race clubs and for polo

This section is intended to monitor high-value transactions and be in compliance with tax obligations in the case of luxury consumption.

Who are considered "collectors" and "collectees" under this provision?

Understanding TCS on Sale of Luxury Goods and Motor Vehicles Section 206C(1F)

Collectors (Sellers) under Section 206C(1) and 206C(1F) are:

• The Central Government
• State Governments
• Local authorities or corporations formed under Central, State or Provincial Acts
• Companies, firms, or cooperative societies
• Individuals or Hindu Undivided Families whose aggregate sales, gross receipts, or turnover is more than Rs. 1 crore from business or Rs. 50 lakh from the profession during the last financial year

Collectees (Buyers) are individuals who acquire the specified goods, other than:

• The Central Government, State Governments, embassies, High Commissions, legations, commissions,
• consulates, and trade representations of foreign States
• Local authorities as defined in the Explanation to clause (20) of section 10
• Public sector entities involved in the activity of transporting passengers

This differentiation makes clear who is to collect TCS and from whom it is to be collected.

What is the applicable rate for TCS collection under Section 206C (1F)?

Understanding TCS on Sale of Luxury Goods and Motor Vehicles Section 206C(1F)

The normal rate of TCS collection is 1% of the aggregate sales consideration, including GST and other charges. In case the buyer does not provide an Aadhaar-linked PAN, a higher TCS rate of 5% is charged. The higher rate is a compliance mechanism to ensure proper documentation and identification for high-value transactions.

When should the TCS be collected by the seller?

The point in time for the collection of TCS is defined as “at the time of receipt of consideration.” This implies that whenever the seller receives any sum in respect of sale consideration in respect of the said goods amounting to over Rs. 10 lakh, they are to collect the TCS at that instance. The provision mandates prompt compliance at the time of receipt of payment, whether in the form of part or full payment of the goods in question.

This timing requirement allows the tax to be collected in tandem with the movement of funds, enabling improved tax administration and tracking of compliance for high-value luxury transactions.