What is the applicability?
- With effect from 1st July, 2021;
- On aggregate value of purchase exceeding INR 50 lacs from a single seller in a financial year.
- To buyer whose turnover from business exceeds INR 10 Crore during preceding financial year i.e. excluding GST; and
- Only on purchase of Goods
What is the Non-Applicability?
- TDS is deductible under any other provisions of Income Tax Act;
- TCS is collectible under any other provisions of Income Tax Act, other than under section 206C(1H);
- Aggregate value of purchases does not exceeds INR 50 lacs from a single supplier in a financial year;
- On purchase of services;
If supplier is non-resident, Central Govt. or State Govt., Local Authority etc.; and To buyer whose business turnover (excluding GST) does not exceeds INR 10 Crore during preceding financial year.
Deduction
| Time | Rate |
| TDS shall be deductible at the time of credit or payment, whichever is earlier | 0.1% of the purchase value exceeding INR 50 lacs for a financial year |
What are the Other Provisions of Section 194Q?
1. TDS is to be deposited on or before 7th of next month (30th April only for TDS deducted during March) Tax Deducted at Source shall also be deducted on advance payments made for purchase of goods.
2. Tax Deducted at Source shall also be deducted on advance payments made for purchase of goods.
3. The seller doesn’t have an option to approach the assessing officer to issue a certificate for a lower tax deduction or to file declaration for nil deduction in respect of transactions covered under section 194Q.
4. Tax Deducted at Source Return to be filed on quarterly basis on or before 31st of the month following the respective quarter.
Clarifications On Vide Circular 13 of 2021 Dated 30th June, 2021
On 1st July 2021, A Circular was issued by the CBDT to clarify various aspects and ambiguities relating to provisions of TDS on Purchase of Goods (Section 194Q), which have been made effective from 1st July, 2021. Major points we have already covered above, however, few essential clarifications provided in the circular are as under:
TCS on Sale of Goods V/s. TDS on Purchase of Goods:
| TCS under section 206C(1H) (TCS on Sale of Goods) | TDS under section 194Q (TDS on Purchase of Goods) | TDS under section 194Q (TDS on Purchase of Goods) |
| TCS payable on receipt of consideration | Credit (issue of invoice) | Advance Payment |
| TCS applicable on full amount including GST | TDS applicable on amount excluding GST i.e. only on Taxable Value | TDS applicable on gross amount of payment including GST |
Threshold Provision:
Since the threshold of INR 50 lacs is with respect to financial year calculation of sum for triggering TDS under section 194Q will be calculated from 1st April, 2021. Therefore, if a person being buyer has already paid to a seller INR 50 lacs or more up to 30th June 2021, the TDS under section 194Q shall apply on all credit or payment during the financial year on or after 1st July, 2021 to such seller.
Transitional Provision:
| Transitional Provision | Transitional Provision | Transitional Provision |
| Invoice as well as Payment before 1st July | Invoice or Payment, anyone before 1st July | Invoice as well as Payment, both after 1st July |
| TDS Not Applicable | TDS Not Applicable | TDS Applicable |
Non-Resident Buyer:
Provisions of section 194Q will not apply to a buyer who is non-resident.
Buyer / Seller having only exempt Income:
Provisions of Section 194Q will not apply on purchase of goods from a person(Seller), who is exempt from income tax under the Act (like person exempt under section 10) or under any other Act like RBI Act, ADB Act etc. passed by the Parliament. Similarly, with respect to TCS on Sale of Goods [Section 206C (1H)], it is clarified that the provisions of this sub-section will not apply to sale of goods to a person, being a buyer, who as a person is exempt from income tax under the Act (like person exempt under section 10) or under any other Act like RBI Act, ADB Act etc. passed by the Parliament.
It is mandatory to note that the above clarifications would not apply if only part of the income of the person (being a seller or being a buyer, as the case may be) is exempt.
Transactions in Securities and Commodities:
Provisions of section 194Q will not be applicable in relation to,-
Transactions in securities & commodities which are traded by recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in IFSC (International Financial Service Centre); and
Transactions in electricity, energy saving certificates & renewable energy certificates traded by power exchanges registered according to the Regulation 21 of the
Temporary Relief:
If, for any cause, TCS has been collected by the seller before the buyer could deduct TDS on the same transaction, such transaction would not be subjected to TDS again by the buyer.
TDS V/s. TCS on Goods, where Buyer’s turnover as well as Seller is greater than INR 10 Crore.
| For Purchases | For Purchases | For Purchases |
| 1st Invoice is issued & Payment is made later on | 1st Invoice is issued & Payment is made later on | Advance Payment cases |
| Tax Collected at Source is mentioned in Invoice | Tax Collected at Source is mentioned in Invoice | Payment is initiated by the buyer and thus, TDS provisions are triggered first and TDS should be deducted from the amount of payment |
| No need to deduct TDS | TDS should be deducted | Payment is initiated by the buyer and thus, TDS provisions are triggered first and TDS should be deducted from the amount of payment |
| For Sales | For Sales | For Sales |
| 1st Invoice is issued and Payment is received later on | 1st Invoice is issued and Payment is received later on | Advance Payment Cases |
| Seller wishes to charge TCS | Seller does not intend to charge TCS | Payment is initiated by the buyer and hence TDS provisions are triggered first. Let Buyer deduct TDS. |
| TCS to be charged in the invoice itself. No need to deduct TDS by the buyer | Do not mention TCS in invoice. Let Buyer deduct TDS. | Payment is initiated by the buyer and hence TDS provisions are triggered first. Let Buyer deduct TDS. |