How Does New TCS Impact E-Invoicing?

Under the Income Tax Act, the Finance Act of 2020 added TCS to the sale of goods. This will start on October 1, 2020. This rule could also have an effect on the GST requirement to send bills electronically. The article goes into detail about this. You can explore debit notes and credit notes to know about sale and purchase return transactions in business.

Through the Finance Act of 2020, the government has added a new section 206C (1H) to extend the TCS rules to the seller of goods. According to this rule, a seller whose annual sales are more than Rs 10 crore and who gets more than Rs 50 lakh from a single buyer must collect tax. It’s important to remember that the TCS should be taken out when the amount is received.

Calculation of TCS and Effective Dates

This rule goes into effect on October 1, 2020. When a buyer pays a seller more than Rs.50 lakh in a single financial year, the seller must collect tax at the source at a rate of 0.1%. (Due to COVID-19, this rate has been cut to 0.075% until March 31, 2021.

Also, Rs. 50 lakh is the limit for the whole financial year. So, if the buyer gives the seller any money for the sale between April 1, 2020, and September 30, 2020, that money will be counted toward the Rs. 50 lakh limit for that buyer.

For example, if buyer “Y” gives seller “X” Rs.45 lakh between April 2020 and September 2020. But if the person later gets Rs.10 lakh on October 10, 2020, TCS will apply and it will be taken out of Rs.5 lakh (55 lakh minus 50 lakh) at a rate of 0.075 per cent.

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How Does the New TCS Provision Impact E-invoicing?

In India, e-Invoicing is being put in place in stages. The government is trying to stop tax evasion with e-invoicing by making it a requirement that every B2B invoice be posted on the government portal.

In the third phase, e-invoicing became mandatory for all companies with more than Rs.50 crore in sales as of April 1, 2021. In the fourth phase, businesses with an annual turnover of more than Rs.20 crore in any year from 2017-18 to 2021-22 were able to use e-invoicing.

Section 206C does not have a separate rule for TCS under the current e-invoicing rule (1H). When making the Invoice Reference Number, the TCS that is part of the invoice value should be put in the “other charges” section. This way, the total invoice value will include the TCS. So, this amount will be added automatically to the invoice value in GSTR-1 as well.


This new TCS rule applies to what is received, not to what is sold. If you want to know tcs on what is sold, then checkout tcs on sale of goods. So, the person selling the goods must pay TCS on any payments made in advance that are later applied to the invoice. So, it’s best to collect TCS when you get the receipt instead of when you get the invoice. Also, e-invoicing will have no effect if TCS is not included in the invoice. 

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