TDS on purchase of goods under Section 194Q (Circular No. 13 of 2021)
Article covers Section 194Q- TDS on Purchase of Goods. ( Clarifying Guideline ), Section 206C(1H) – TCS on sale of Goods, Section 206AB/206CCA – Higher TDS/TCS Rate For Non Filer of Income Tax Return and Section 194O – TDS on Payments Made to e-commerce Participants.
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Sec – 194Q : TDS on Purchase of Goods W.E.F. JULY 1, 2021
Deductor – Buyer of goods having Turnover exceeding Rs. 10 Crore in Preceding FY.
Deductee – Resident Seller .
Rate of Tax – 0.1%
Threshold Limit – On purchase consideration exceeding Rs. 50 LAKH.
Time of Deduction – TDS to be Deducted at the time of Credit or Payment whichever is earlier.
The buyer is require to deduct TDS at the rate of 0.1% of the purchase value above INR 50 Lakhs.
However, in case the Permanent Account Number (PAN) of the seller is not available. Then, the buyer would be liable to deduct tax @ 5%
This section is not applicable where buyer is under an obligation to deduct TDS under any other section or suffers TCS except under section 206C (1H)
Guidelines Issued on Sec-194Q
Applicability on transactions carried through various Exchanges
Not Applicable on the followings
transactions traded through recognized stock exchanges / Cleared by clearing Corporation
transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered with Regulation 21 of CERC.
Calculation of threshold for the financial year 2021-22.
threshold limit of Rs.50 Lacs should be computed by considering the Turnover from 01st April 2021
Whether TDS u/s 194Q is required to be deducted even on GST Component ?
TDS is not required to be deducted on GST Component, however when TDS is deducted on Payment Basis{Advance Payment}, then in such case TDS is required to be deducted on entire amount paid.
Whether non-resident can be buyer under section 194Q of the Act?
Not Applicable to Non-Resident Buyer who do not have fixed place of business in India
What is the Treatment of Purchase Returns ?
a)In case where the goods purchases are replaced by the Seller, then in such a scenario, the buyer need not deducted TDS u/s 194Q again on the said Transaction.
b) Where the goods purchased are returned by the Seller, then in such a scenario, such Tax already deducted may be adjusted against the next Purchase against the same seller.
Whether provisions of section 194Q of the Act shall apply to buyer if the turnover from business is 10 crore or less ?
His turnover or receipts From Non-Business activity is not counted for this purpose, Hence the sales or gross receipts or turnover from business carried on by him must exceed Rs. 10 crore.
Cross Application of section 194 Q, 194O 206C (1H)
Sec 194Q, 206C (1H) and 194O apply on the same transaction.
Sec – 194O override Sec – 194Q and Sec – 206C (1H)
(Primary responsibility is on E-Commerce Operator i.e., even if the seller is collected tax under Section 206C (1H) the E-Commerce Operator is require to deduct tax on the same transaction. This is because the rate of tax in section 194O is higher than a rate of tax in section 206c (1H).)
Sec – 194 Q override section 206C (1H), if the Buyer is liable to deduct TDS
(But For any reason, if the seller is collected TCS on the transaction, then buyer is not require to deduct TDS on the same transaction.)
What if the Buyer fails to comply with the Tax Deductions covered u/s 194 Q ?
In case the buyer fails to comply with the tax deduction provisions covered under section 194Q. Then, as per the provision of section 40(a)(ia), there would be disallowance of expenditure up to 30% of the value of the transaction.
Section 206C(1H) – TCS on sale of Goods
W.E.F. From 1st October, 2020.
Who is liable to collect TCS – Seller of goods having Turnover exceeding Rs.10 Crore in preceding FY.
Rate of Tax – 0.1%
Threshold limit – On sale consideration exceeding Rs.50 Lakhs.
Time of Collection – TCS to be collected at the time of receipt of such amount.
Seller not to collect TCS under section 206C (1H) where the buyer is under an obligation to deduct TDS under Section 194Q.
Sec 206AB/206CCA – Higher TDS/TCS Rates for Non-Filer Of Returns
W.E.F. July 1, 2021
Deductor – Any person
Deductee – Specified person*.
*Specified person means a person who have not filed their Income Tax Return for 2 years and due date for filling the return has already expired ; AND
TDS Deducted / TCS collected in his case for each of those year is Rs. 50,000 or More.
Rate of Tax – Higher of the following
Twice the rate specified in the relevant provision of the Act. 0r
At the rate of 5%
Applicability – On all the Payments where TDS is required to be deducted except for section 192, 192A, 194B, 194BB, 194LBC or 194N
Section – 194O TDS on payment Made to E-commerce Participants
W.E.F. from October 1, 2020
Deductor – E Commerce Operator
Deductee – E commerce Participant (Must Be Resident of India )
Rate of Tax – @ 1%
A ceiling limit of Rs 5 lakh is set only for resident individuals and HUF. Thus, an e-Commerce operator is not required to deduct TDS if the amount, paid or credited to individuals/HUF during a financial year, does not exceed Rs 5 lakh.
E-commerce participant being a resident individual or HUF
E-commerce operator is not required to deduct TDS if the gross amount of sale of goods, services, or both during the previous year does not exceed Rs 5 lakh and if the e-Commerce participant has furnished his PAN or Aadhaar.
If the e-Commerce participant does not furnish his PAN or Aadhaar, TDS must be deducted at the rate of 5%, as per provisions of Section 206AA.
E-Commerce participant being a non-resident
As stated earlier, an e-Commerce participant must be a resident of India. Thus, no TDS will be deducted if the participant is a non-resident.
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