On 1/10/2020, new section 206C(1H) relating to TCS on sale of goods was introduced. It states that, the seller at the time of sale of goods of the value aggregating to Rupees Fifty Lakhs or more in previous year should deducted TCS. Further the following year a new section was introduced in the Finance Bill relating to tax deducted by purchaser instead of seller at the time of purchase of goods. After discussions the same was inserted in Finance Act, 2021 which effects from 01.07.2021. Section 194Q speaks about Tax Deducted at Source (TDS) by the purchase at the time of purchase of goods of the value aggregating to Rupees Fifty Lakhs or more in previous year.

1. Applicable to buyer who purchases goods from resident seller. Here the main catch point is that the buyer should purchase goods only from a resident seller.

2. Buyer means a person whose sales/gross receipts/ turnover exceeds Rs. 10Crors in previous financial year.

3. The buyer, at the time of credit of such sum to the account of the seller or at the time ofpayment, whichever is earlier, is required to deduct TDS.

4. Buyer purchases goods from seller of the aggregate value of exceeding Rs. 50Lakhs.

5. The TDS shall be deducted on the exceeding value @ 0.1%. If the seller does not have PAN, then the TDS deducted shall be @ 5%.

6. When there are purchase returns, the buyer must deduct the tax under this section on that purchase.

In case of purchase return, the tax deducted will be adjusted against the same seller.

7. Provisions shall not apply on purchase of goods from a person, being a seller, who as a person is exempt from income tax under the act or under any other acts passed by parliament. (if only part income exempted, then exemption not allowed).

8. Tax will also be applied if payment is made in advance.

9. If tax has been collected under section 194O (e-commerce), then the same will not be deducted under this section.

10. Section not applicable:

i. to securities/commodities traded through recognized stock exchanges and recognized clearing houses.

ii. transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation.

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Qualification: CS
Company: N/A
Location: Bangalore, Karnataka, India
Member Since: 31 Jul 2021 | Total Posts: 8
Prerna Hunagund is a Practising Company Secretary, Graduate in Commerce & an Associate Member of the Institute of Company Secretaries of India, New Delhi, having knowledge in Corporate and Secretarial Law. View Full Profile

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2 Comments

  1. Sachin Sharma says:

    Hello mam
    Please guide about how to determine exemption limit, suppose we make such payments to the party for RS 50 lakh from April to june . But we purchase Goods only for RS 45 lakh ,,on what basis we can determine exemption limit payment basis or purchase basis .please guide

    1. Prerna Hunagund says:

      Sachin

      the goods has to be purchased for Rs, 50 lakhs and more. here in your case, the value of goods is Rs. 45 lakhs, so the Section 194Q will not attract. the overall transaction needs to be for more than Rs. 50 lakhs then only this the buyer can deduct TDS.

      hope the query is resolved.

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