Tax Collection at Source in relation of Credit / Debit Notes

[Ishant Bansal]

Hi,

With the advent of Section 206 (1H) - Tax Coolection at Source, many of our clients are facing issues with respect of TCS and its treatment in Credit Note / Debit which is issued in usual course of business to alter the Invoice of supply of goods or service.

Let us say in case of supply of goods,

First, goods are dispatched under an invoice which shall include TCS as well.

Later, when the goods are received by the buyers, there are certain events which alters the value of material accepted by the buyer - for example - Shortage or Penalty for Quality Deviation, etc., against which the seller issued credit note.

Now, to my understanding, since the TCS is to be collected on the receipt against the sale consideration, when the seller issues credit note to buyer, the credit note should include the corresponding reversal of TCS.

As per the clarificaton issued by the department, there was no effect to be made in credit note or debit in respect of TCS if the sale consideration is already received before the issue of credit note or debit note.

I seek clarity from you all dignitaries in respect of inclusion of TCS in credit note or debit note if ;-

1. Credit Note or Debit Note is issued before the receipt of sale consideration.

2. Credit Note or Debit is issued after the receipt of sale consderation.

AI Summary

Clarification on Tax Collection at Source (TCS) in Credit and Debit Notes Issued Before Sale Consideration Receipt Under Section 206(1H). A discussion on the treatment of Tax Collection at Source (TCS) in relation to credit and debit notes was initiated due to issues faced by clients under Section 206(1H). The query focused on whether TCS should be included in credit or debit notes when issued before or after the receipt of sale consideration. One participant suggested that credit or debit notes should include TCS, while another advised that they should not include TCS. The clarification from the tax department indicated no effect on credit or debit notes regarding TCS if the sale consideration was received before their issuance.