Section-194Q | TDS on Purchase of Goods | CBDT Clarification

Section-194Q ( TDS On Purchase of Goods)-CBDT Clarification vide Circular No. 13 of 2021-Income Tax dated: 30th June 2021

1) Clarification on TDS U/s-194Q on GST Component involved in Purchases

TCS U/s-206C (1H) was collected on Consideration received inclusive of GST because TCS Collection event under this section is “Receipt of Payment”.

However for TDS U/s-194Q TDS Deduction event is Credit of Seller’s A/c or payment, whichever is earlier. So following Clarification is made:-

a) If Purchase event (Invoice Date) falls earlier:-

In this case TDS to be deducted on Basic portion (also allowed as per Old TDS Circular No. 23/2017, dated 19.07.2017) and GST portion to be ignored because in this case we can separately ascertain GST & Basic part from purchase Invoice as both are indicated separately in Invoice

b) If Payment event falls earlier (Advanced Payment case):-

In this case TDS to be deducted on whole total payment made because it is not possible to identify GST Component involved in such advanced payment. In this case advanced payment may be for multiple invoices (not traceable from particular invoice) which will be issued in future and so we cannot ascertain basic and GST Component and hence TDS to be deducted on whole total payment made.

2) Clarification on TDS U/s-194Q on Threshold Limit

a) Section 194Q mandate to deduct TDS at the time of Credit of Seller’s A/c or payment, whichever is earlier. So if either of two event happened before 01st July 2021, then that transaction shall not be subject to TDS U/s-194Q.

b) If Buyer has already made payment or made purchase for Rs.50 Lakhs or more upto 30th June 2021, the TDS U/s-194Q shall be deducted on all transaction on or after 01st July 2021 as Rs.50 Lakhs limit has already been consumed & so every transaction on/after 01st July 2021 is in excess of threshold of Rs.50 Lakhs.