Section 194Q : TDS on Purchase of GOODS - Income Tax - Ready Reckoner - Income Tax

Section 194Q : Deduction on payment on certain sum for Purchase of goods. [Inserted by Finance Act, 2021, w.e.f. 01-07-2021 ] Applicability and rate of TDS 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 ₹ 50,00,000 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% of such sum exceeding ₹ 50,00,000 as income-tax. Time of deduction Credit to the books of account of seller or at the time of payment whichever is earlier. Where any sum 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. Meaning of Buyer Buyer means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ₹ 10 crore rupees 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. Non applicability 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 section 206C(1H) applies. Power of CBDT to issue guidelines Adjustment for GST, various state level and taxes other than GST, purchases return vide Circular No. 17 of 2020 dated 29.09.2020, it was clarified that no adjustment on account of GST is required to be made for collection of tax under section 206C(1H) since the collection is made with reference of amount of sale consideration. However, the situation is different so far as TDS is concerned. it has been clarified in circular No. 23/2017 dated 19.07.2017 as under The Board hereby clarifies that wherever in terms of the agreement or contract between the payer and the payee, the component of 'GST on services' comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid or payable without including such 'GST on services' component. GST for these purposes shall include IGST, CGST, SGST and UTGST. Guidelines issued for the purpose of removing the certain difficulty vide Circular No. 13 of 2021 dated 30/06/2021 and circular no. 20/2021 dated 25.11.2021 Applicability on transactions carried through various Exchanges It has been represented that there are practical difficulties in implementing the provisions of Tax Deduction at Source (TDS) contained in section 194Q of the Act in case of certain exchanges and clearing corporations. It has been stated that sometime in these transactions there is no one to one contract between the buyers and the sellers. In order to remove such difficulties, it is provided that the provisions of section 194Q of the Act shall not be applicable in relation to,- ​​​​​​​(i) transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service Centre; (ii) transactions in electricity. renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC.