prpri Section-194Q TDS on Purchase of Goods with Clarifications Section-194Q TDS on Purchase of Goods with Some Burning Issues Clarifications

SECTION-194Q-TDS ON PAYMENT OF CERTAIN SUM FOR PURCHASE OF GOODS

Section 194Q was inserted by the Act No. 13 of 2021, w.e.f. 1-7-2021 which says to deduct TDS on purchase of goods subject to certain conditions fulfillment.

Let’s see in detail how the whole provisions of this section works, its applicability & other burning issues.

APPLICABILITY

> Any Person, Being A Buyer Who Pays Any Sum To Resident Seller.

> For Purchase of Any Goods

> Value Of Such Goods Exceeding Fifty Lakh Rupees In Any Previous Year

> At the Time of Credit or Payment, Whichever Is Earlier

> Deduct TDS @0.1%

> Of Sum Exceeding Fifty Lakh Rupees.

DEFINITION OF BUYER

> Whose Total Sales, Gross Receipts Or Turnover From Business > Ten Crores During The Financial Year Immediately Preceding The Financial Year In Which Goods Are Purchased.

> If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.

THIS SECTION NOT APPLIES TO

> Transaction on Which Tax Is Deductible Under Any of the Provisions of This Act

> Tax Is Collectible Under the Provisions Of Section 206C Other Than A Transaction To Which Sub-Section (1H) Of Section 206C

GUIDELINES BY CENTRAL GOVT VIDE CIRCULAR NO-13 OF 2021

♦ TRANSACTIONS CARRIED THROUGH EXCHANGES

Section-194Q Not Applicable Where

√ Transactions In Securities & Commodities Through Recognised Stock Exchanges Or Cleared And Settled By Recognised Stock Exchanges.

√ Transactions In Electricity, Renewable Energy Certificates & Energy Saving Certificates Traded Through Power Exchanges Registered In Accordance With Regulation 21 Of Cerc.

♦ CALCULATION OF THRESHOLD FOR financial year 2021-22- CERTAIN ISSUES

√ Section-194Q Will Not Applicable On Any Sum Credited Or Paid Before 01.07.2021

√ If Either Credited Or Paid Before 01.07.2021- Section-194Q-Not Applicable

√ Threshold (Rs 50,00,000/-) During F.Y. 2021-22 Will Be Computed From 01.04.2021. If Already Paid/Credited Rs 5000000 From 01.4.2021 To 30.06.2021, Then Section-194Q Will Be Applicable.

♦ ADJUSTMENT OF GST FOR THE PURPOSE OF TDS U/S 194Q

# CIRCULAR NO-23 OF 2017 DATED 19.07.2017 Says That- In Terms Of Agreement Between Buyer & Seller, If Component Of GST Is Indicated Separately, TDS Will Be Deducted Without Considering Component Of GST.

# Meaning Thereby In Section-194Q, If Any Amount Is Credited In The Account Of Seller & That Amount Is Comprised Of GST Component, Then TDS Will Be Deducted On Amount Excluding GST. However If Payment Is Made Earlier, Then TDS Will Be Deducted On Entire Payment As It Is Not Possible To Identify GST Component In Payment.

♦ ADJUSTMENT FOR PURCHASE RETURN

√ PURCHASE MADE- PURCHASE RETURNED- TDS ID Already Deducted On Purchase Prior To Return- Seller Refunded Amount For Purchase Return- TDS Already Deducted May Be Adjusted Against Next Purchases From Same Seller.

√ No Adjustment Required If Purchase Return Replaced With Goods.

# OTHER FAQS

Whether Non-Resident Can Be Buyer For The Purpose Of Section-194Q ?

Not Apply To NR If——–Purchase Of Goods Is Not Effectively Connected With Its Pe In India.

Whether TDS Is To Be Deducted When Seller Is A Person Whose Income Is Exempt ?

TDS Will Be Not Be Deducted If Seller Is A Person Who Is Exempt From Income Tax Under The ACT (Like RBI ACT, ADB ATC ETC.) If Part Of Income Is Exempt, Then This Clarification Will Not Apply.

Whether TDS Is To be Deducted On Advance Payment?

Yes, As Per This Section TDS Is To Be Deducted On Credit Or Payment Whichever Is Earlier.

Whether Section-194Q Applies To Buyer In The Year Of Its Incorporation?

Since Criteria Of RS. 10 Crore Turnover In Preceding Year Doesn’t Satisfy Then This Section Will Not Applicable In The Year Of Incorporation.

Whether Section-194Q Applies If Buyer’s Turnover In Preceding Year Is Rs 10 Crore Or Less ?

If Turnover From Business Carried On By Buyer Exceeds Rs 10 Crore Then Section-194Q Will Be Applicable. Non Business Income Will Not Be Considered In The Ten Crore Limit.

APPLICATION OF SECTION-194O, 206C(1H) & 194Q

√ If TDS Deducted By E-Commerce Operator U/S 194O, Then Transaction Will Not Be Subjected To TDS U/S 194Q

√ If Transaction Is Both Within The Purview Of 194O & 194Q, Then The Tds Will Be Deducted U/S 194O & Not 194Q.

√ If Transaction Is Both Within The Purview Of 194O & 206C(1H), Then The TDS Will Be Deducted U/S 194O & Not 206C(1H).

√ If Transaction Is Both Within The Purview Of 194Q & 206C(1H), Then The TDS Will Be Deducted U/S 194Q & Not 206C(1H).

SOURCE- INCOME TAX ACT WITH ITS RECENT CIRCULARS

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Qualification: CA in Practice
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Location: Delhi, Delhi, India
Member Since: 17 May 2021 | Total Posts: 2
CA IN PRACTICE IN DELHI, HANDLING MATTERS OF INCOME TAX, TDS, GST & OTHER ADVISORY MATTERS. View Full Profile

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13 Comments

  1. Sachin Sharma says:

    Hello sir this side sachin, I want to know one thing how to determine the exemption limit , with gst component or without gst components , suppose one bill amount is 19 lakh with gst and another bill amount is 22 lakh with gst before 30.06.2021 and one purchase is done on 1.07.2021 for rs 17 lakh with gst & gst rate is 18% , now how to calculate exemption limit on which amount gst component or without or on which amounts we deduct tds

    1. CA NITIN JAIN says:

      SECTION-194Q TALKS ABOUT-Deduction of tax at source on payment of certain sum for purchase of goods. As per my view, rice husk comes under the category of goods. And also till now, there is no list of goods specified by Govt. on which TDS under this section will not be applicable.

  2. RAJEEV SHARMA says:

    IF MILL DESPATCHED GOODS ON 29-06-2021 AND IT ADDED TCS AND WE RECEIVED THE GOODS ON 4-07-2021. THEN WE HAVE TO DEDUCT TDS ON THIS BILL OR NOT WHEN PAYMENT IS DONE

  3. Ravikant S. Mavlankar says:

    Whether to deduct TDS on the Bill before 01.07.2021 if we are doing payment after 01.07.2021 and the total is exceeding 50 lakhs

    1. CA NITIN JAIN says:

      CIRCULAR NO-13 DATED 30.06.2021 CLEARLY MENTIONS THAT-

      —-Since section 194Q of the Act mandates buyer to deduct tax on credit of sum in the
      account of seller or on payment of such sum, whichever earlier, the provision of this
      sub-section shall not apply on any sum credited or paid before I st July 2021. If either of
      the two events had happened before 1st July 2021 , that transaction would not be
      subjected to the provisions of section 194Q of the Act.
      (ii) Since the threshold of fifty lakh rupees is with respect to the previous year,
      calculation of sum for triggering TDS under section 194Q shall be computed from 1st April, 2021. Hence, if a person being buyer has already credited or paid fifty lakh rupees or more up to 30th June 2021 to a seller, the TDS under section 194Q shall apply on all credit or payment during the previous year, on or after Ist July 2021 , to such seller.
      Hope it clarifies your query.

  4. Manish Ray Chaudhuri says:

    Whether Govt. Department engage in Public Distribution System is required to deduct TDS u/s 194Q against purchase of sugar for more than 4 crores per month.

  5. Suresh Babu P says:

    Circular add the following ;
    ,””However, if, for any reason, tax has been collected by the seller under
    sub-section (I H) of section 206C of the Act, before the buyer could deduct tax under
    section 194-Q of the Act on the same transaction, such transaction would not be
    subjected to tax deduction again by the buyer. This concession is provided to remove
    difficulty, since tax rate of deduction and collection are same in section 194Q and sub-
    section (IH) of section 206C of the Act””. This happen when most of the suppliers levy TCS on their invoices which helps a large number of buyer to come out the ambit of this provision.

    1. CA NITIN JAIN says:

      IF TDS DEDUCTED ON AMOUNT CREDITED BASIS AND COMPONENT OF GST IS INDICATED SEPARATELY, THE NTDS WILL BE DEDUCTED ON BASIC AMOUNT EXCLUDING GST. HOWEVER IF TDS IS DEDUCTED ONM PAYMENT & THAT PAYMENT GST AMOUNT IS NOT IDENTIFIABLE, THEN TDS WILL BE DEDUCTED ON ENTIRE PAYMENT.

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