Section 206CD – Other Forest Produce (Not Tendu Leaves)

Introduction to Section 206CD

Section 206CD of the Income Tax Act, 1961, mandates the collection of Tax Collected at Source (TCS) on the sale of other forest produce (not being tendu leaves or timber). This provision is part of the broader Section 206C, which deals with TCS on various specified goods. It aims to broaden the tax net within the trade of miscellaneous forest products.

Key Provisions of Section 206CD

1. Applicability and Seller's Responsibility:

The TCS provisions generally apply to sellers whose total sales, gross receipts, or turnover exceeded Rs. 10 crore in the preceding financial year.

• The seller must collect TCS at the time of debiting the amount payable by the buyer or at the time of receipt of such amount, whichever is earlier.
• The collected TCS must be deposited with the government using Challan Number 281 by the 7th day of the month following the month in which the tax was collected. For TCS collected in March, the due date is April 30.

2. Who is the Seller (Collector)?

Any person who is a seller of other forest produce (not being tendu leaves or timber) is liable to collect TCS, provided their turnover criteria are met.

3. Who is the Buyer (Collectee)?

Any person who is a buyer of such forest produce is liable to pay TCS to the seller.

4. Threshold Limit:

Section 206CD does not specify a separate threshold limit for the collection of TCS. The obligation to collect TCS arises on every sale of other forest produce (excluding tendu leaves and timber).

5. TCS Rate (Effective from April 1, 2025):

As per the Finance Bill 2025, the TCS rate for any other forest produce not being timber or tendu leaves (obtained under a forest lease) has been reduced to 2% of the sale consideration.

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

6. Clarified Definition of "Forest Produce" (Effective from April 1, 2025):

The term "forest produce" is now explicitly defined to have the same meaning as provided in any relevant State Act or the Indian Forest Act, 1927. This aims to remove ambiguities in its interpretation.

7. Scope of Applicability (Effective from April 1, 2025):

Going forward, TCS on "other forest produce (not being timber or tendu leaves)" will only be applicable if such produce is obtained under a forest lease. Previously, it was applicable to all kinds of sales of forest produce.

8. PAN Requirement and Higher TCS Rate:

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. However, sections 206AB and 206CCA, which mandated higher TDS/TCS for non-filers, have been removed from April 1, 2025, simplifying compliance.

9. Exemptions from TCS Collection:

TCS under Section 206CD is not required in the following cases:

• If the buyer purchases the goods for personal consumption.
• If the buyer purchases the goods for the purpose of manufacturing, processing, or producing any article or thing, or for the purpose of generating power, and not for trading purposes. In such cases, the buyer needs to furnish a declaration in Form 27C to the seller.
• If the buyer is the Central Government, State Government, an embassy, a high commission, a consulate, a trade representative of a foreign country, or a local authority.

Compliance and Importance

For sellers of other forest produce, ensuring compliance with Section 206CD is essential. This includes:

• Timely collection of TCS from buyers.
• Accurate deposit of the collected TCS with the government.
• Proper filing of quarterly TCS statements (Form 27EQ).
• Issuance of TCS certificates (Form 27D) to buyers for the collected tax.

This section is crucial for bringing transactions related to miscellaneous forest produce under the tax collection ambit, contributing to better tax compliance and transparency in the sector.