Section 194Q analysis and its interplay with other provisions of the Income Tax Act, 1961:
Brief about Section 194Q (TDS on Purchase of Goods)
Date of Applicability: It is applicable from 01.07.2021
Who needs to comply:- Buyer of Goods having total sales, gross receipts or turnover from the business of more than Rs.10 crores during financial year immediately preceding the financial year;
When is Buyer liable to deduct TDS: – If responsible for paying any sum for purchase of goods exceeding Rs.50 lakhs from a resident seller excluding transaction on which:-
- tax is deductible under any of the provisions of this Act;
- TCS other than TCS u/s 206C(1H) is applicable
Point of TDS:- Credit or Payment whichever is earlier, credit even to suspense account also to be considered;
TDS Rate:- 0.1% on consideration for purchase of goods;(Non PAN/Non-Aadhar Case-5%)
Point of trigger:- Purchase from one person > Rs.50 lakhs;
From which date the threshold limit of Rs. 50 lakhs will be computed- It will be counted from 01.04.2021
Whether TDS has to be deducted on advance payment made to the seller–Yes, TDS is required to be deducted based on Credit or payment whichever is earlier.
Amount on which TDS applicable: – Purchase Value exceeding Rs.50 Lakh
Brief about Section 206C (1H)(TCS on Sale of Goods)
Date of Applicability: It is applicable from 01.10.2020
Who needs to comply:- Seller of Goods having total sales, gross receipts or turnover from the business of more than Rs.10 crores during financial year immediately preceding the financial year;
When is seller liable to collect TCS:- receives any amount as consideration for sale of any goods exceeding Rs.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
Point of TCS:- Receipt of consideration;
TCS Rate:- 0.1% on consideration for sale of goods;(Non PAN/Non-Aadhar Case-1%)
Point of trigger:- Sales to one person > Rs.50 lakhs;
Amount on which TCS applicable:- Total consideration during the year – Rs.50 lakhs
Interplay between Section 194Q and Section 206C(1H)(TDS on Purchase of Goods Vs.TCS on Sale of Goods)
- Section 206C(1H) makes the seller responsible to collect TCS while Section 194Q requires Buyer to deduct TDS;
- If 194Q (TDS on Purchase of Goods) is applicable then 206C(1H)(TCS on Sale of Goods) is not applicable;
- If both buyer and seller are covered by Section 194Q and Section 206C(1H) then only buyer need to deduct TDS, seller is not supposed to collect TCS;
Example on Interplay between TDS and TCS Provision:
| Particulars | Scenario 1 | Scenario 2 | Scenario 3 |
| Turnover of Seller (In cr.) (Previous Year) | 12 | 6 | 12 |
| Turnover of Buyer (In cr.) (Previous Year) | 6 | 12 | 12 |
| 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 (Assuming PAN/Aadhar is available) | 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 |