Amendment in Section 206C vide Finance Act 2016 – Clarifications

CBDT came with circular on Amendment in Section 206C vide Finance Act 2016 – Clarifications vide circular number Cirular No. 22/2016.

Detailed content of the circular is as given below:

Section 206C of the Income-tax Act, 1961 (hereafter referred to as ‘Act’), prior to amendment by Finance Act,20 16. provided that the seller shall collect tax at source at specified rate from the buyer at the time of sale of specified items such as alcoholic liquor [or human consumption, tender leaves, mineral being coal or lignite or iron orc etc. It also provided for collection of tax at source at the rate of one per cent on sale in cash of bullion exceeding 21akh rupees andjewcllery exceeding S iakh rupees.

In order to reduce the cash transactions in sale of goods and services, Finance Act 2016 has expanded the scope of section 206C (I D) to provide that the seller shall collect tax at the rate of one per cent from the purchaser on sale in cash of any goods (other than bullion and jewellery) or providing of any services (other than payment on which tax is deducted at source under Chapter XV II-B) exceeding two lakh rupees. So far as sale of Jewellery and bullion is concerned, the provisions of sub-section (1 D) of section 206C prior to its amendment by the Finance Act,2016 shall continue to apply. Further, with a view to bring high value transactions within the tax net, it has been provided in sub- section (1 F) of section 206C of the Act that the seller who receives consideration for sale of a motor vehicle exceeding ten lakh rupees, shall collect one per cent of the sale consideration as tax from the buyer. Any person who obtains in any sale, the goods of the nature specified in sub-section (I D) or (1 F) of section 206C is a buyer. The seller for the purposes of collection of lax under section 206C shall be –

(i) A Central Government or a state Government,

(ii) Any local authority, or corporation or authority established under any Central, State or Provincial Act,

(iii) Any company, firm or cooperative society, •

(iv) An individual or Hindu undivided family who is liable to audit as per provisions of section 44AB during the financial year immediately preceding the financial year in which the goods are sold or the services arc provided.

The amendments brought in section 206C by Finance Act, 20 16 are applicable form l SI June 2016.

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