Last year, Government implemented TCS provision u/s 206C(1H)  for `Seller of Goods’ on Receipts/advance from/for  Sales of Goods, exceeding Rs. 50 Lakhs as  consideration, during a financial year. “Seller” means a person whose total sales, gross receipts or turnover from the business carried on by him exceeded  ten crore rupees during the financial year immediately preceding the financial year in which consideration/advance  exceeding Rs. 50 Lakh are received.

There were instances, where Seller Turnover is less than 10 Crore but his receipts from sales of goods to buyers were exceeding Rs. 50 Lakh. Therefore, there was no obligation to collect TCS on seller. To resolve  this situation,  Government has come up with a similar type of provision for Purchaser(Buyer) via TDS applicability u/s 194Q.

BOTH PROVISIONS JUXSTAPOSED:

TCS provisions are already in force and TDS  provision u/s 194Q  have to become  effective from 01/07/2021, it would be interesting to juxtapose both provisions to study the effects:

SECTION  194Q SECTION 206C(1H)
Meaning of Buyer Explanation to Section 194Q(1) mentions:  “buyer” means a person whose total sales, gross receipts or turnover from the business carried by him exceed ten crore  rupees during the financial year immediately preceding the financial year in which the purchase of goods  is carried out …… Explanation (a) to Section 206C(1H) mentions:  “buyer” means a person who purchases any goods, but does not include,- a) Government b) Local Authority c) Importer of the goods
Meaning of Seller Not defined Explanation (b) to Section 206C(1H) mentions:  “seller” means a person whose total sales, gross receipts or turnover from the business carried by him exceed ten crore  rupees during the financial year immediately preceding the financial year in which the sale  of goods  is carried out
Rate of TDS/ TCS An amount equal to 0.1 per cent of such sum exceeding fifty lakh rupees as Income Tax. A sum equal to @ 0.1 percent of the sales consideration exceeding fifty lakh rupees as Income Tax
Rate of TDS/TCS where PAN/Aadahr not furnished If PAN not furnished  by seller, then @ 5%  in place 0.1% If buyer does provide PAN or Aadhaar  Number, the @ 5% in place of 0.1%
Time of Deduction / Collection At the time of  credit of  such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier At  the time of receipt of such amount, collect from buyer, a sum equal to 0.1 percen t of the sale consideration exceeding fifty lakh rupees a
Over-riding the other  TDS/TCS Sections of the Act Section 194Q(5) provides: The provisions of this section shall not apply to a transactions on which- a) Tax is deductible under any 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 Second proviso to Section 206C(1H) provides “ the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provisions of this Act on the  goods purchased by him from the seller and has deducted such amount

SOME TRICKY SITUATIONS:

Situations where buyer and sellers are having turnover in excess of Rs. 10 Crore in preceding financial years and are covered by the Section 194Q and 206C(1H):

Situations SECTION  194Q SECTION 206C(1H)
Buyer has purchased goods or made advance payment Buyer would be deducting the TDS @ 0.1% on the payment/advance  made for purchase of goods after -01/07/2021 As TDS has already been deducted u/s 194Q, seller would not collect any TCS from the buyer
Buyer has paid the dues out of the payble balance as on 30/06/2021 Buyer would not deduct TDS Seller would collect the TCS on such amount received
Buyer has bought the goods but returned later on without crediting in the Seller’s Account No obligation to deduct TDS No amount  received
Buyer has bought the goods but returned later on after crediting in the Seller’s Account and debiting on return of the goods TDS  would have to be deducted from the credited amount despite subsequent debit by way of return of goods. Therefore, accounting entry of credit should be passed after full acceptance of the goods No amount  received
Buyer was liable but did not deduct TDS Seller would be liable to collect TCS  as second proviso to Section 206C(1H)  fails to operate.

GOVT NEEDS TO REMOVE THE DIFFICULTIES IN IMPLEMENTAIOTN

Provision in  the present shape is going to put a number of challenges in its implementation such as:

a) How would the buyer deduct the TDS of Public Sector Companies g. Steel Authority of India Ltd.(SAIL).  SAIL is collecting the TCS in their `Sale Bills’.  Now, when buyer would become liable to TDS, then how would the buyer deduct TDS and make balance payment to SAIL.  In most probable situation,  SAIL would ask the buyers to deposit the TDS first and thereafter claim reimbursement from SAIL on the basis of form 16A

b) DISCOMs of the various states are collecting TCS in their Electricity bills as `Electricity’ is goods. How would the DISCOMs accepting `Net of TDS’ payment ? They may also follow the same route as mention in a) above.

c) How would the `Seller’ come to know that `Buyer’ is liable to deduct TDS u/s 194Q ? Income Tax Rules should  bring out the form for  submission to `Seller’  by buyer to this effect.  Without standard  format,  buyers would be designing their own format.   A case in point is the declarations being furnished by Transporters u/s 194C(6), where in absence of standard format, every transporter has developed the format as per their convenience.

Author hopes that Govt. would make the provisions workable for the Deductors

(Author acknowledges the contribution  of Shri Ayush Jain, Articled Trainee in preparation of this article) 

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