Section 194Q of the Income Tax Act - TDS on purchase of Goods
In
the Finance Act 2021, the New Section 194Q has been inserted which reads as
under: -
'194Q. (1) Any person, being a buyer
who is responsible for paying any sum to any resident (hereafter in this
section referred to as the seller) for purchase of any goods of the value or
aggregate of such value exceeding fifty lakh rupees in any previous year,
shall, at the time of credit of such sum to the account of the seller or at the
time of payment thereof by any mode, whichever is earlier, deduct an amount
equal to 0.1 per cent of such sum exceeding fifty lakh rupees as
income-tax.
Explanation: For the purposes of this
sub-section, "buyer" means a person whose total sales, gross receipts
or turnover from the business carried on by him exceed Rs. 10 crores during the
financial year immediately preceding the financial year in which the purchase
of goods is carried out, not being a person, as the Central Government may, by
notification in the Official Gazette, specify for this purpose, subject to such
conditions as may be specified therein.
(2) Where any sum referred to in
sub-section (1) is credited to any account, whether called "suspense
account" or by any other name, in the books of account of the person
liable to pay such income, such credit of income shall be deemed to be the
credit of such income to the account of the payee and the provisions of this
section shall apply accordingly.
(3) If any difficulty arises in giving
effect to the provisions of this section, the Board may, with the previous
approval of the Central Government, issue guidelines for the purpose of
removing the difficulty.
(4) Every guideline issued by the Board
under sub-section (3) shall, as soon as may be after it is issued, be laid
before each House of Parliament, and shall be binding on the income-tax
authorities and the person liable to deduct tax.
(5) The provisions of this section
shall not apply to a transaction on which—
(a) tax is deductible under any of the
provisions of this Act; and
(b) tax is collectible under the
provisions of section 206C other than a transaction to which sub-section (1H)
of section 206C applies.
However, section 206C(1H) which is already part of
Income Tax Act which deals which TCS on sales of goods above 50 lakhs @ 0.1%
casts responsibility of seller of goods to collect TCS at the time of
collection above 50 lakhs. In the said section the following has been provided
regarding non-applicability of the TCS:
‘Provided
further that the provisions of this sub-section shall not apply, if the
buyer is liable to deduct tax at source under any other provision of this Act
on the goods purchased by him from the seller and has deducted such amount.’
Therefore, as per the above provisions the buyer
shall have the primary and foremost obligation to deduct the tax, if the
transaction is subject to both provisions i.e., TDS u/s. 194Q & TCS u/s.
206C(1H).
Analysis
of the Applicability of Section 194Q:
- Rate of TDS: @0.1% (if No PAN @5%)
- Threshold limit: On purchase transaction exceeding Rs. 50 Lacs from a resident person.
- Applicability: The buyers whose turnover exceeds Rs. 10 Cr in preceding year and
this amendment will take effect from 01-07-2021.
- Non-applicability: Transaction on which TDS and TCS applicable under any other
section other than a transaction to which Section 206C (1H) applies (If he
does so, the seller will not have any obligation to collect the tax u/s.
206C (1H)).
- Timing of Deduction: At the time of credit of such sum to the account of the seller or
at the time of payment thereof by any mode, whichever is earlier. The tax
shall be deducted even if the sum is credited to the 'Suspense Account'.
- Simultaneous applicability of
TDS & TCS: The buyer shall have the primary and
foremost obligation to deduct the tax, if the transaction is subject to
both provisions and hence no tax shall be collected on such transaction
u/s. 206C(1H) (Second Proviso to Section 206C(1H) provides that if the
buyer is liable to deduct tax under any other provision on the goods
purchased by him from the seller and has deducted such amount, no tax
shall be collected on the same transaction).
However, if the buyer makes a default, the liability
to collect the tax gets shifted to the seller.
Example
|
Particulars |
Scenario 1 |
Scenario 2 |
Scenario 3 |
|
Turnover of Seller (In cr.) |
15 |
8 |
15 |
|
Turnover of Buyer (In cr.) |
8 |
15 |
15 |
|
Sale of goods (In cr.) |
2 |
2 |
2 |
|
Sales consideration paid during the year (In cr.) |
1 |
1 |
1 |
|
Who is liable to deduct or collect tax? |
Seller |
Buyer |
Buyer |
|
Rate of Tax |
0.1% |
0.1% |
0.1% |
|
Amount on which tax to be deducted or collected
(In Cr.) |
0.5 |
1.5 |
1.5 |
|
Tax to be deducted or collected |
5,000 |
15,000 |
15,000 |
- Date from which the threshold
limit of Rs. 50 lakhs shall be computed:
Applying the same principle as clarified regarding Section 206C(1H), the
threshold of Rs. 50 lakhs shall be computed from 01-04-2021. Thus, if a
buyer has already purchased goods of value Rs. 50 lakhs or more up to
30-06-2021 from a seller, TDS under this provision shall apply on all
purchases on or after 01-07-2021.
It is to be note that nothing has been specified in this regard, further
clarification is awaited on the same.
- Value on which TDS is to be
deducted: Applying the same principle as
clarified regarding Section 206C(1H), TDS is deductible on the purchase
value inclusive of GST.
It is to be note that nothing has been specified in this regard, further
clarification is awaited on the same.
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