Finance Act 2021 has introduced a new section on TDS – Section 194Q (TDS on purchase of goods), which will be coming in effect from 1st July 2021. In October 2020 the new provision on TCS (Section 206C 1H-TDS on sale of goods) was introduced, now a similar provision (sec. 194Q) is introduced to cover the uncovered part of dealings of goods.
As per sec.194Q – A person is liable to deduct TDS, if-
As per sec. 194Q – Rate of the TDS is 0.1% of total value of transaction. In case PAN of the supplier is not provided than TDS @5% will be deducted.
Time limit for deducting the TDS is earlier of payment or credit of seller’s account. In case buyer is fail to deduct TDS as per the provision of Section 194Q, then 30% of the expenditure will be disallowed.
Cases when TDS u/s 194Q is not deductible:
As per clarification given by Memorandum to Finance Act 2021, in case of where both provision TDS u/s 194Q and TCS u/s 206C (1H) is applicable then TDS u/s 194Q will be deducted. If buyer & seller both fulfilled the criteria for applicability of section 194Q & 206C(1H), then primary responsibility to deduct the TDS in this case is of buyer. Any failure on the part of buyer to deduct TDS will make the seller liable to for TCS.
Conclusion: Provision of section 194Q deals with TDS deductible on purchase of goods as similar to the section 206C (1H) – TCS on sale of goods. Section 194Q would prevail over 206C(1H), means that if TDS is deduced as per 194Q then TCS as per 206C(1H) will not be collected.