TDS on Purchase of Goods
Provision:-
Government inserted new TDS Section 194Q which will be effective from 01-July-2021, which say Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, 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, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax.
Why it was required?
Last year government implemented TCS provision for Seller on Receipt of Sales of Goods, more than Rs. 50 Lakhs as sale consideration, during the current financial year. The TCS is payable on the amount of receipt which is greater than 50 Lakhs and received after 1st. Oct. 2020. The rate of TCS is 0.1% and Due to COVID-19 Pandemic Rate of TCS reduce by 25 % until 31 March 2021 and its effective rate is 0.075%. Other Condition for its applicability was “seller” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out.
There were instances where Seller Turnover is less than 10 Crore but his receipt from sales of goods to particular buyer exceeding Rs.50 Lakhs. Therefore, there was no liability of TCS on seller. To handle this situation Government come up with similar type of provision for Purchaser (Buyer) via TDS applicability.
Decoding of Provision:-
- “Buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out.
- In case Seller provided PAN card details, Rate will be 0.1% otherwise it will deducted @5 % as per Sec206 AA.
- TDS Amount will be deduct by buyer on paying sum exceeding Rs.50 Lakhs for purchase of goods in any previous year.
- Amount will be deducted on earlier of following:-
- Payment Date
- Credit of such sum to the account of the seller
- The provisions of this section shall not apply to a transaction in following cases:-
- tax is deductible under any of the provisions of this Act; and
- tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies(TCS).
- As per Exclusion provision under Sec194Q, TCS and TDS both will applicable in case of exchange of amount between Seller and Buyer, exceeding Rs.50 Lakhs, in any previous year. But this is been covered under Sec206C (1H), which specify that “Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount”.
Illustration:-
Seller Turn-over (In Crore) |
Buyer Turn-over (In Crore) |
Receipt or Payment for sale or purchase of Goods in prev-ious year (In Lakhs) |
Amt. on which tax will be calcul-ated |
Seller PAN |
Buyer PAN |
TDS |
TCS |
Liable Person |
Section under IT Act |
Exclu-sion Section |
Reason |
9 |
12 |
54 |
4 |
Available |
N/A |
Yes @0.1% |
N/A |
Buyer |
194Q |
Out of scope of Sec 206C (1H) |
Seller Turnover less than 10 Cr. |
14 |
8 |
57 |
7 |
N/A |
Available |
N/A |
Yes @0.1% |
Seller |
206C(1H) |
Out of scope of Sec 194Q |
Buyer Turnover less than 10 Cr. |
13 |
14 |
62 |
12 |
Available |
Available |
Yes @0.1% |
N/A |
Buyer |
194Q |
Out of scope of Sec 206C (1H) |
Exclusion Provided under Sec 206C(1H) |
9 |
12 |
54 |
4 |
Not Available |
N/A |
Yes @5% |
N/A |
Buyer |
194Q/ 206AA |
Out of scope of Sec 206C (1H) |
Seller Turnover less than 10 Cr. |
14 |
8 |
57 |
7 |
N/A |
Not Available |
N/A |
Yes @1% |
Seller |
206C(1H) / 206AA |
Out of scope of Sec 194Q |
Buyer Turnover less than 10 Cr. |
Author Bio
Query: Please tell me, is 194Q applicable for Old Gold purchases from Unregistered Dealer or Consumer or Customer in case of the Jewellery Business, this is very common to accept old gold purchases from customers against the sale of new jewellery or may be process the payment against of it, it is also common to go beyond 50Lacs overall txns in a year.
Sir, for both supplier and buyer turnover is below 10 crores but transaction value exceeds 50 lakhs then who is responsible ?
VERY NICE ARTICLE. BUT I HAVE A QUESTION. IF A PRODUCT COMES WITH A WARRANTY AND EXTENDED WARRANTY FOR WHICH EXTRA CHARGES ARE PAYABLE. WHETHER CHARGES FOR WARRANTY OR EXTENDED WARRANTY WILL ATTRACT TDS UNDER SECTION 194Q?
What if A vendor has already done Business of Above 2CR with B Party during F.Y. 22-23. A vendor has supplied goods today on 1st April 2023 based on Existing PO balance of March month. Can B Party deduct TDS 1% on delivery of 1st April 2023? or B Party need to give new PO with TCS @0.1% to A Vendor ?
Or A Business deal of 50 Lacs has to be completed first in current financial year then only this practice should be started?
Sir, If the parties GST No. changed in 2nd Quarter, Should his Purchase in Both GST No. includes in Calculation of 194 Q for a FY or I shall be considered only the invoices of new GST No. ??
Respected Sir,
What if purchase of goods is 5 crore and turnover is 9 crore, and in next month if the turnover crosses 10 crore then on which amount tds needs to be deducted as we have already crossed purchase threshold limit of 50 lakhs
Sir, the Limit 50L for TDS u/s 194Q is to be considered on year-to-year basis OR based on preceding year’s figure. That means in 2021-22 TDS was deducted from the first rupee after 50L since purchase exceeded 50L. Now in 2022-23 TDS is applicable from Rs.1 or only after it exceeds Rs.50L
Thanks for early reply. CA Sivaraman Viswanathan, CHENNAi. 9444019672
Suppose Mr. A purchases goods worth INR 30 lakhs on 30.12.2021.His turnover in the previous financial year 2020-21 was 12 crores.
can I deduct tds 194 Q ?
(HI SIR), (THIS IS SHASHI,)WE PURCHASE GOODS MORE THAN 50 LAKS . PARTY GIVEN ONE BILL MORE THAN 50 LACS ,
CAN WE DEDUTCT TDS ON THIS BILL
If previous year turnover applicable any supplier for tds u/s 94Q then current year which criteria applicable to this supplier first bill or after crossing 50 lakhs purchases
As per my knowledge this criteria will continue and required to deduct TDS because the word is used as ” in any previous year”
yes deduct tds
Sir,
We have not deduct tds above 50 lakh of pspcl bill bur pspcl deduct tcs in pspcl bill so we need to deduct tds or not?
For calculation of deductible Rs. 50 Lac, which amount should be considered? Should it be inclusive of GST amount or exclusive? Please clarify it
My flat is 62 lacs so i need to deduct pay 1% that is 62000 and pay the same as tds. Now the proerty is in joint name husband ,wife but payment is from my husband name . Shall we select buyer more than one or not . However seler is one
Sir, for the purpose of calculating 50lacs threshold (not deducting) for 194Q, should I include GST component as well?
Example: Sales Taxable Value= 45lacs, GST=8.1lacs; Total sales value= 53.1lacs.
Should I deduct TDS u/s 194Q or not?
Dear CA Shivangi Goyal, Definition of Turnover not specified in Sec 194Q. In that case, reference is required to be taken from Sec 44AD which implies “Gross revenue receipts from sale of goods and services”. So, turnover is inclusive of GST. Hence for Sec 194Q also, we need to consider GST value in Turnover Calculation.
Dear Shivangi
If you received invoice exceed Rs.50,00,000 first from supplier when you are liable to deduct tds on taxable amount.
If you pay first amount to supplier exceed 50,00,00 when you are liable to pay tds on gross amount.
After 01.07.2021
Understand.
If not then
contact us
sahilkumar798649@gmail.com
our company turnover F.Y 2019-20 Rs. 11.00 Cr and Last Financial Year Turnover (2020 – 21) Rs 4.30 Cr only. This section is applicable or not for our consorn.
if a buyer purchase in a month of february and makes payment on 1st july 2021 can be tds applied?
what if being a Buyer of good have turnover more than 10 crore but buying of goods from particular party does not exceeds 50 lacs. then in this case TCS will apply ? if yes than do buyer need to give declaration ?
if yes than do buyer need to specify that buying limit is below 50lacs?
Pls confirmation for this
Dear payal,
In that case, if buyer turnover FY 2020-2021 is above 1,00,00,000 cr when Seller cannot liable to deduct tcs
Suppose, if buyer cannot purchase any good from supplier FY 21-22 when is not a mean that supplier deduct tcs understand or not …?
If both seller’s and buyer’s turnover is less than 10 crores and receipts in the previous year exceeds 50 lakhs…then is this provision applicable sir?
Sir
Please replay TDS u/s 194Q is Applicable to Govt ( Karnataka State Beverages Corporation Ltd) ? Purchasing Neutral Spirit from through KSBCL
Thanking you
Girish( girishvedha@gamil.com)
I THINK ITS NO APPLICABLE ON PGVCL
IF PGVCL BILL RS. 2 CR TO APLICABLE DEDUCTED TDS 194Q
What is mean by total sales for 10 crore limit?
1. Only Gross sales with gst.
2. Gross sales – sales returns with gst.
3 Gross sales – sales return without gst
Dear sir,
If Seller is already deducting tcs from April onwards …as Sec 194Q Comes into affect from 1st July….so From 1st July the buyer will deduct tds u/s 194Q & seller will stop collecting Tcs …is it so? Pls clarify ??
Dear Sir,Thanks a lot,pls provide the requsite form of declaration u/s 194q
RESPECTED SIR,
MY PURCHASE HAS EXCEEDED 50LAKHS IN APRIL’2021 AND SELLERS HAD DEDUCTED TCS U/s206(1H) AND OUR TURNOVER ALSO EXCEEDED ABOVE 10Cr. IN LAST YEAR
IN THIS REGARD 194Q SECTION APPLICABLE OR TO BE CONTINUE DEDUCT U/s 206(1H)
PLEASE SEND THIS MY MAIL FOR WHICH I SHALL BE THANK TO YOU SIR
.10% need to be deducted on every payment made or once at the end of month on the whole amount paid during the month . if i pay ten times should i deduct ten times or one time?
I want declaration format
on which amount the TDS will be deduct under section 194Q whether on taxable value or on invoice vale
Dear Sir
It is informative and gives clear understanding
Please tell me, if my purchase is from the Government Company (RCF ltd). This section is applicable or not.
Respected sir,
if my purchase from a particular party exceeds 50 lakh from April 2021 itself than does i have to deduct tds u/s 194q @ 0.10% from April it self or i have to deduct tds from 1 July 2021
and further Purchase transaction between 1 April to 30 June 2021 needs to consider or not
please enlighten my knowledge on above case
Regards
CA SACHIN MARU
Yes purchase transaction from 1-4-2021 need to be considered for calculating the threshold limit . But if purchase has exceeded the limit before june 2021 then tax has to be deducted on purchase made on or after 1st July 2021. So if threshold exceeded before 1st July then TDS u/s 194Q has to be deducted on all purchase made on or after 1st July 2021 not on purchase made before that even it has exceeded the limit . As the same query has arised for section 206C(1H) and the same has been clarified by the CBDT in its circular.
Yes Purchase transaction from 1st April 2021 is to be considered for calculating threshold limit . Regarding your query if purchase transaction has exceeded the limit in April itself then tax has to be deducted on all purchase transaction made on or after 1st July 2021 , no TDS has to be deducted on purchase transaction between April to June 2021 even if it exceeded the threshold limit .
As the same query has been raised on section 206C(1H) and the same has been clarified by CBDT in its circular.
Sir what will be the limit for next F.Y. I mean do we check this limit of purchase of 50 lakh. Every year or do we check it once in a lifetime for a buyer
sir if a buyer purchase in a month of february 2021 and makes payment on 1st july 2021 can be tds applied?
Sir, what if Turnover of Both the buyer and seller was 50 Lakh in Previous Year? Is that covered u/s 194Q or u/s 206C(1H)?
DEAR SIR,
NICE ARTICLE AND EASY TO UNDERSTAND.
CAN YOU PLEASE MAIL ME THE ILLUSTRATION MENTIONED IN THIS ARTICLE FOR TDS.
REGARDS