TCS on Sale of Goods Has Ended: Is Your Billing Software Still Charging It?
TCS at 0.1% on sale of goods above ₹50 lakh (Section 206C(1H)) was withdrawn from 1 April 2025, so sellers should switch it off in billing software and correct any wrongly collected amounts. The buyer's 0.1% TDS on purchases above ₹50 lakh continues, now under Section 393 with payment code 1031.
From 2020 to March 2025, large sellers added 0.1% TCS to invoices once a customer's purchases crossed ₹50 lakh in a year. That rule was withdrawn from 1 April 2025. Yet some businesses still see a TCS line on invoices, because nobody switched it off in the billing software.
What changed
| Before 1 April 2025 | From 1 April 2025 |
|---|---|
| Seller collected 0.1% TCS under Section 206C(1H) on receipts above ₹50 lakh from a buyer | Withdrawn. No TCS on sale of goods |
| Buyer deducted 0.1% TDS under Section 194Q on purchases above ₹50 lakh, if the buyer's turnover was over ₹10 crore | Continues |
The two rules overlapped, with the same 0.1% rate and ₹50 lakh threshold, which caused years of confusion about who should act. Now only the buyer acts.
Under the Income-tax Act, 2025, TDS on purchase of goods sits in the Section 393 TDS table, with payment code 1031. The rate and threshold have not changed.
Why invoices still show TCS
- ✓The TCS setting in the billing or accounting software was never turned off.
- ✓Customer records still carry a "TCS applicable" flag from 2024-25.
- ✓Invoice templates have a fixed TCS line.
What to do
- Turn off TCS on sale of goods in your billing software and remove it from invoice templates.
- Check invoices from 1 April 2025 onward for any TCS charged.
- Refund or adjust wrongly collected amounts with the customer, and correct your TCS returns if you deposited it. Speak to your CA about the right correction.
- Check the buyer's TDS instead. If you sell more than ₹50 lakh a year to a large buyer, they will deduct 0.1% TDS on purchases. Match it with your annual tax statement and claim it in your return.
TCS that still applies
The withdrawal covers only the general TCS on sale of goods. Other TCS categories are separate and continue, such as those on scrap and certain minerals and on motor vehicles above ₹10 lakh. Check the current list before switching every TCS setting off.
A worked example
A Morbi tile maker sells ₹3 crore a year to a Mumbai distributor whose turnover is above ₹10 crore. In FY 2024-25 the maker collected TCS. From FY 2025-26 it collects nothing. The distributor deducts 0.1% TDS on purchases above ₹50 lakh: 0.1% of ₹2.5 crore, or ₹25,000 a year, which the maker claims against its own tax.
Frequently asked questions
Does GST change because of this?
No. GST is charged on the invoice value as before. TCS was never part of the GST value.
We are the buyer. Do we still deduct TDS?
Yes, if your turnover in the previous year was above ₹10 crore and your purchases from that seller exceed ₹50 lakh in the year.
What about TCS by e-commerce platforms?
That is a separate rule, collected by the marketplace on sellers' sales, and it continues.
Sources
- ✓TCS changes from 1 April 2025, TDSMAN
- ✓Section 194Q vs Section 206C(1H), Patron Accounting
- ✓Income-tax Act, 2025: TDS rates, thresholds and payment codes, TaxGuru
This is a summary, not legal advice. Confirm with your chartered accountant before you rely on it.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
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