# Section 206C(1) - TCS on Specified Goods

## TCS Rates Table

Item	TCS Rate
(a) Alcoholic liquor for human consumption	1%
(b) Tendu leaves	5%
(c) Timber obtained under a forest lease	2%
(d) Timber obtained by any mode other than (c)	2%
(e) Any other forest produce (not timber/tendu leaves)	2%
(f) Scrap	1%
(g) Minerals (coal, lignite, iron ore)	1%

## Exemption Through Declaration

No TCS shall be collected if Resident Buyer gives declaration that above goods are to be utilised for:

Manufacturing
Processing
Producing articles or things
Generation of power

AND NOT for trading purposes.

## Caution: Interaction with Section 194Q

Even if buyer gives declaration for no-TCS, the buyer must still deduct TDS u/s 194Q if conditions of 194Q apply.

Worked example

### Example 1

Example: A steel manufacturer purchases scrap worth ₹80 lakhs from a scrap dealer. The manufacturer gives a declaration that scrap will be used for manufacturing. Is TCS/TDS applicable?

Answer: Seller does not collect TCS u/s 206C(1) due to declaration. However, since purchase exceeds ₹50 lakhs and conditions of Section 194Q apply, the buyer must deduct TDS @ 0.1% on amount exceeding ₹50 lakhs.

⚠️ Common exam mistakes

Allowing declaration exemption when goods are used for trading purposes
Assuming TCS exemption (via declaration) also removes 194Q TDS obligation
Applying rates uniformly without distinguishing tendu leaves (5%) vs other forest produce (2%)

Reference: 206C(1) — Income Tax Act, 1961

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