Section 206C(6): Consequences of Failure to Collect TCS

Table of Contents

1. Legal Provision

Section 206C(6)imposes penalties on sellers/collectors who fail to collect Tax Collected at Source (TCS) as required under Section 206C(1).
Objective: Ensures compliance and prevents revenue leakage in high-value transactions (e.g., scrap, minerals, liquor, etc.).

Failure to Collect TCS :

| Late Deposit | 1.5% interest per month (if collected but not deposited on time). |

| Incorrect PAN | Higher TCS (5% or 20% under Section 206CC) if buyer’s PAN is invalid/missing. |

| Non-Filing of TCS Return (Form 27EQ) | ₹200/day late fee (Section 234E) + ₹10,000–₹1,00,000 penalty (Section 271H). |

Seller’s Turnover > ₹10 Crore: Mandatory TCS collection if sale to a buyer exceeds ₹50 lakh/year.
Buyer’s PAN Must Be Valid: Else, higher TCS applies.
TCS Must Be Deposited: By the 7th of the next month(e.g., August 7 for July collections).

CASE	RULING
CIT vs. Karnataka Forest Dept. (2019)	Govt. sellers liable for TCS on timber sales.
Jindal Steel vs. ITO (2021)	Penalty applies even if buyer later pays tax.
Amazon India vs. CBDT (2023)	E-commerce operators must collect TCS under Section 206C(1H).

Collect Pending TCS: With interest.
File Revised Return (Form 27EQ): Correct omissions.
Apply for Waiver: If delay was due to reasonable cause (e.g., technical error).

Scenario: A steel trader (turnover ₹15 crore) fails to collect 1% TCSon a ₹60 lakh scrap sale.
Penalty: ₹60,000 (TCS) + 1% monthly interestuntil paid.

✔ TCS must be collected if turnover > ₹10 crore & sale > ₹50 lakh/buyer.

✔ Penalty = TCS amount + interest for non-compliance.

✔ Rectify errors via revised returns to avoid prosecution.