Recent CBDT circular on Section 206C(1H) and Section 194Q has created more confusion. There are still anomalies. I have tried to collect all Problems related to drafting of these sections & Problems related to implementing Section 206C(1H) & Section 194Q. Also check suggestions. I have suggested 3 measures which can streamline section 194Q and section 206C(1H) and These measures can work as a standard operating procedure for removing all confusions amongst taxpayers for implementing both these sections.
| POINT NO | PROBLEMS STILL EXIST IN 194Q AND 206C(1H) | SUGGESTIONS TO STREAMLINE |
| 1. LEVY OF TCS u/s 206C(1H) | After 9 months of Implementation, Taxpayers are charging TCS in INVOICE (i.e on sales) (because many big companies started this from 1-10-20). Reason is – Levy on “Collection” is an impossible & very Illogical task. | Make Amendment in Section 206C(1H) , And make levy of TCS on “Sales” ( as same is done for sales of Scrap) . This will be in line with the Accrual system of Accounting. And This will save efforts of Reconciliation |
| 2. TCS u/s 206C(1H) – Double Taxation as collection includes GST | In continuation with the above problem , Currently TCS is to be levied on Collection amount which includes GST . This creates Double Taxation as collection includes GST | Making Amendment as above will solve this problem also If TCS on Sales (Basic amount) then there won’t be Double levy |
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3. When both sections applicable on Same transactions – 194Q ON PURCHASE (FOR BUYER) VS 206C(1H) ON SALES (FOR SELLER) |
Circular No. 13 of 2021, Issued ON 30TH JUNE 2021 – POINT NO 4.9.5 (V) – This clarification says that Seller continues to Collect TCS then Buyer will not require to Deduct TDS and if Buyer want to Deduct TDS then Seller will not do anything I. e That means Either one person (Buyer or seller) do the Compliance then It will save other. Whoever takes Action first, that will be ok.
This makes contradiction. Currently, 194Q is very clear that even if TCS is levied by Seller, when 194Q is applicable then Buyer compulsory need to deduct TDS So They are continue to charge TCS . Putting Buyers in dilemma , Can there be two equally valid legally correct options in law ?? What about disallowance under section 40(a)(ia) i.e if Buyer doesn’t deduct ? What will happen in Scrutiny? How can Something written in circular can override the Act? |
Circular is giving relief on the part that when TCS is continued to collect by seller then Buyer is not require. However, 194Q need to be amended to provide this relief in Act itself. Taxpayer have been confused and worried with regard to disallowance u/s 40(a)(ia). Check below I have provided Current Section 194Q and Suggestion to make by making Amendment in 194Q. By removing this line, the Legislative can make sure the Circular stands properly in line with BARE Act. And so no disallowance in 40(a)(ia) by not deducting 194Q . |
Current Section 194Q(5) and Suggestion To Make Amendment In 194Q(5) By Removing One Line
| CURRENTLY 194Q(5) | SUGGESTION TO MAKE AMENDMENT IN 194Q(5) BY REMOVING ONE LINE |
| (5) The provisions of this section shall not apply to a transaction on which—
(a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.]
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(5) The provisions of this section shall not apply to a transaction on which—
(a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.]
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Author Bio
I think main spirit behind 194Q, 206C(1H) is to collect tax at somewhat earlier as compared to the time frame of ITR. it can not be with the thought to curb black transactions. It doesn’t stand to reason that parties having turnover of 10 crore plus and transacting with single parties for more than 50 lakhs (threshold in acts) be dealing with unrecorded entries.
In my opinion this could have been achieved by replacing the Advance tax frequency from Quarterly to monthly. This will be comparatively less hectic for the taxpayers and the Govt will be getting almost same tax collections as are received in form of TDS in 194Q or TCS in 206C (1H)