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CMA Final · Direct Tax Laws and International Taxation · Collection, Recovery and Refund of Tax

Under the Income-tax Act, 2025, a seller of scrap receives Rs 8,00,000 from a resident buyer who is a manufacturer and who gives no declaration. At the rate now stated in the Table in section 394, how much tax must the seller collect at source on this sale of scrap?

The seller must collect Rs 16,000. Sale of scrap attracts TCS at 2% under the Table in section 394, and no declaration was furnished by the buyer. The Rs 10 lakh threshold applies only to motor vehicles and notified goods, so 2% of Rs 8,00,000 is collected.

  1. ARs 8,000
  2. BRs 16,000Correct
  3. CRs 40,000
  4. DNil, because the receipt is below Rs 10 lakh

Explanation

Sl. No. 4 of the Table in section 394(1) fixes the rate for sale of scrap at 2% (substituted for 1% from 1-4-2026). No declaration is given, so the exemption in sub-section (2) is not available. Tax = 2% x 8,00,000 = Rs 16,000. Rs 8,000 uses the old 1% rate. The Rs 10 lakh threshold applies only to motor vehicles and notified goods (Sl. No. 6), not to scrap.

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