By Mohan and Ravi Chartered Accountants
[A] S.194Q : TAX DEDUCTION ON PURCHASE OF GOODS
The Finance Act, 2021 has introduced a new Section 194Q by which the buyer is responsible for paying any sum to any resident (seller) for the purchase of any goods of the value or aggregate of such value exceeding Rs.50 Lakh in any previous year to make TDS. The features of this section are given as below :
APPLICABILITY
From 1st July, 2021
RATE OF TDS
TDS shall be collected by the buyer at 0.1% of the amount in excess of Rs.50 Lakh. TDS shall be 5% instead of 0.1% if PAN or Aadhaar is not provided by the seller.
CONDITIONS FOR APPLICABILITY
1. TDS obligation will arise when the payment is made to a resident seller.
2. Goods are purchased for a value or aggregate of value exceeding Rs. 50 lakhs.
WHO HAS TO COLLECT TDS
- Under Section 194Q buyer is liable to deduct tax at source from seller while making payment to seller.
- “Buyer” means a person total sales or gross receipts or turnover exceeds Rs 10 crore during the financial year immediately preceding the financial year in which the sale of sale of goods is carried out.
- “Seller” means a person who sells goods to the buyer and the value or the aggregate value of goods during previous year exceeds Rs 50 lakh.
WHEN TO COLLECT TDS
Tax to be is to be deducted at the earliest of the following dates:
- Time of credit of such sum to the account of the seller
- Time of payment
NON APPLICABILITY
- In case the buyer is the Central Government, State Government, Embassy, Legation or trade representation of foreign state, local authority as per S.10(20)
- In case the goods are imported
- In case any TDS provisions are applicable to the goods
- In case where the goods are covered under S.206C [other than S.206C(1H)
[B] S.206C(1H):TCS ON SALE OF GOODS OVER A LIMIT
Last year in the Finance Act, 2020 a new provision has been introduced with effect from 01.10.2020 whereby a seller of the goods has to collect 0.1% of the sales value exceeding Rs.50 Lakh from the buyer by way of tax collection at source (TCS). The salient features of this section are as follows:
RATE OF TCS
TCS shall be collected by the seller at 0.1% of the amount in excess of Rs.50 Lakh. TCS shall be 1% instead of 0.1% if PAN or Aadhaar is not provided by the buyer.
WHO HAS TO COLLECT TCS
- Under Section 206C(1H) seller is liable to collect tax at source from buyer.
- “Seller” for this purpose means whose turnover exceeds Rs 10 crore during the financial year immediately preceding the financial year in which the sale of sale of goods is carried out.
- “Buyer” means a person who purchases goods from seller and value or aggregate value of goods during previous year exceeds Rs 50 lakh.
WHEN TO COLLECT TCS
- Seller receives any amount as consideration for sale of any goods of the value exceeding Rs 50 lakh from any single buyer. ?
- TCS has to be collected at the time of received of such amount i.e. on RECEIPT BASIS.
- For the F.Y. 2020-21, the threshold of Rs.50 lakh is to be computed from 01st April, 2020, however TCS is applicable only on the sum received after 01st October, 2020.
[C] ANALYSIS OF S.194Q AND S.206C(1H)
1. S.194Q deduction is the responsibility of the buyer.
2. S.206C(1H) collection is the responsibility of the seller.
3. In a transaction, if the TDS u/s 194Q and TCS u/s 206C(1H) is applicable then S.194Q shall prevail over S.206C(1H).
4. If these sections are applicable, then obtain a letter from concerned persons that their Turnover in the financial year immediately preceding the financial year exceeds Rs.10 Crore.
5. However, the aggregate transaction of Rs.50 lakh under section shall be reckoned from 01-04-2021 onwards even though the section is applicable from 01-07-2021.
