Section 206CA – TCS on Sale of Alcoholic Liquor for Human Consumption

Introduction to Section 206CA

Section 206CA of the Income Tax Act, 1961, mandates the collection of Tax Collected at Source (TCS) on the sale of alcoholic liquor for human consumption. This provision places the responsibility on the seller to collect tax at a specified rate from the buyer at the time of sale. It's a key measure to ensure tax compliance in the trade of alcoholic beverages, which is a highly regulated sector.

Key Provisions of Section 206CA

1. Applicability:

Section 206CA applies to the sale of alcoholic liquor for human consumption.

• This specifically targets the trade of alcohol intended for direct consumption by individuals.

2. Who is the Seller (Collector)?

Any person who is a seller of alcoholic liquor for human consumption, and who receives consideration for such sale, is liable to collect TCS.

• This typically includes wholesalers, distributors, and manufacturers selling alcoholic liquor. Retailers making sales to end consumers may also fall under this if they are above certain thresholds or if specifically notified.

3. Who is the Buyer (Collectee)?

Any person who is a buyer of alcoholic liquor for human consumption from such a seller is liable to pay TCS.

4. Threshold Limit:

Unlike some other TCS provisions, Section 206CA does not specify a separate threshold limit for the collection of TCS. The obligation to collect TCS arises on every sale of alcoholic liquor for human consumption.

5. TCS Rate:

The rate of TCS to be collected under Section 206CA is 1% of the sale consideration.

• This rate applies to the amount received by the seller from the buyer.

6. When TCS is Collected:

TCS is to be collected at the time of receipt of the amount from the buyer.

• This means the collection event is linked to the payment received for the sale, rather than the booking of the sale.

7. PAN Requirement and Higher TCS Rate (Section 206CC):

It is mandatory for the buyer to furnish their Permanent Account Number (PAN) to the seller. If the buyer fails to provide their PAN, TCS shall be collected at a higher rate as prescribed under Section 206CC of the Act. Generally, this higher rate would be double the specified rate (i.e., 2%) or 5%, whichever is higher for specified persons who have not filed their ITRs.

8. No TCS in Certain Cases:

The provisions of Section 206CA shall not apply if the alcoholic liquor is used for manufacturing purposes and not for human consumption.

• This exemption is crucial for industries that use alcohol as a raw material for producing other goods (e.g., in pharmaceutical, chemical, or perfume industries). The buyer needs to furnish a declaration to the seller that the alcohol is for manufacturing and not for human consumption.

Compliance and Importance

For sellers of alcoholic liquor, strict adherence to Section 206CA is paramount. They must ensure:

• Timely collection of TCS from buyers.
• Accurate deposit of the collected TCS with the government within the stipulated due dates.
• Proper filing of TCS statements (Form 27EQ).
• Issuance of TCS certificates (Form 27D) to buyers.

This section plays a significant role in bringing the unorganized sectors of liquor trade into the tax net and enhancing revenue collection for the government by tracking transactions at the source.