What is the treatment of GST and other state levies & taxes while deducting tax under section 194Q?

Ans. (a) Where tax is deductible at the time of credit

Tax under section 194Q shall be deducted on the amount credited without including GST & other non-GST levies such as VAT, Sales Tax, Excise Duty, CST, etc. if the following conditions are satisfied:

i. Tax is deducted at the time of credit of the amount in the account of the seller; and

ii. The component of GST and non-GST levies comprised in the amount payable to the seller is indicated separately as per the terms of the agreement or contract between the buyer and the seller.

(b) Where tax is deductible at the time of payment

If the tax is deducted on a payment basis because the payment is earlier than the credit, the tax would be deducted on the whole amount as it is not possible to identify the payment with the GST component or non-GST levies component to be invoiced in future.