Skip to content

Section-194Q | TDS on Purchase of Goods | CBDT Clarification

Section-194Q (Tax Deducted at Source (TDS) On Purchase of Goods)-In this article we will know what clarification CBDT provide on the same?

1) Clarification on TDS under section-194Q on GST Component involved in Purchases

TCS under section -206C (1H) was collected on Consideration received inclusive of GST since TCS Collection event under this section is “Receipt of Payment”.

However for TDS under section -194Q TDS Deduction event is Credit of Seller’s account or payment, whichever is earlier.

So these Clarification is made:-

a) If Purchase event (Invoice Date) comes earlier:-

In this case TDS to be deducted on Basic portion (also allowed according to the Old TDS Circular No. 23/2017, dated 19 July 2017) and GST composition to be ignored because in this case we can separately ascertain GST & Basic component from purchase Invoice as both are indicated separately in Invoice

b) If Payment event comes earlier (Advanced Payment case):-

In this case TDS to be deducted on whole payment made because in such advanced payment, it is not possible to identify GST Component involved. In this case advanced payment may be for multiple invoices (not traceable from particular invoice) which will be issued in future and so we can’t ascertain basic and GST Component and thus TDS to be deducted on whole total payment made.

2) Clarification on TDS Under Section-194Q on Threshold Limit

a) Section 194Q mandate to deduct TDS at the time of Credit of Seller’s Account or payment, whichever is earlier. So if either of two event happened before 01st July 2021, then that transaction will not be subject to TDS under section -194Q.

b) If Buyer has already made payment or made purchase for INR 50 lacs or more upto 30th June 2021, the TDS under section -194Q shall be deducted on all transaction on or after 01st July 2021 as INR 50 lacs limit has already been consumed & so every transaction on/after 01st July 2021 is in excess of threshold of INR 50 lacs.