Introduction
Finance Act, 2021 has introduced Section 194Q with effect from 1st July, 2021.
Briefly about Section 194Q
Who needs to comply: Buyer of Goods having total sales, gross receipts or turnover from the business of more than ₹ 10 crores during financial year immediately preceding the financial year in which purchase of goods is carried out from a resident seller;
When is the buyer liable to deduct TDS: If responsible for paying any sum for purchase of goods exceeding ₹ 50 lakhs from a resident seller excluding transaction on which:-
• tax is deductible under any of the provisions of this Act;
• TCS is collectible other than TCS u/s 206C(1H)
Point of TDS: Credit or payment whichever is earlier, credit even to suspense account also to be considered as ‘credit’;
TDS Rate: 0.1% on consideration for purchase of goods exceeding INR 50 lakhs;
Point of trigger: Purchase from a resident seller > ₹ 50 lakhs;
Amount on which TDS applicable: Sum Paid or Credited whichever is earlier during the year as reduced by Rs. 50 lakhs;
Briefly about Section 206C(1H)
Who needs to comply: Seller of Goods having total sales, gross receipts or turnover from the business of more than ₹ 10 crores during financial year immediately preceding the financial year in which sale of goods is carried out;
When is seller liable to collect TCS: When the seller receives any amount as consideration for sale of any goods exceeding ₹ 50 lakhs excluding:-
• Consideration for goods being exported;
• Consideration on which TCS u/s 206C(1), 206C(1F) or 206C(1G) is applicable;
• Buyer is liable to deduct TDS under any other provision of this Act including TDS u/s 194Q and has also deducted TDS (Twin condition applicable)
Point of TCS: Receipt of consideration;
TCS Rate: 0.1% on consideration for sale of goods;
Point of trigger: Sales to a buyer > ₹ 50 lakhs;
Amount on which TCS applicable: Total consideration received during the year as reduced by ₹ 50 lakhs;
Interplay between Section 194Q and Section 206C(1H)
• Transaction on which both sections are attracted is same i.e. Sale / Purchase of goods;
• Section 206C(1H) makes the seller responsible to collect TCS while Section 194Q requires Buyer to deduct TDS;
• If 194Q is applicable and TDS is deducted by the Buyer then 206C(1H) is not applicable as per second proviso to section 206C(1H);
• If both buyer and seller are covered by Section 194Q and Section 206C(1H) then generally only buyer need to deduct TDS, seller is not supposed to collect TCS as per Section 194Q(5).
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