New Section 194Q – TDS on Purchase of GOODS

New Section 194Q - TDS on Purchase of GOODS

This section has been inserted by Finance Act 2021 which will be effective from 01-July-2021.

  • Applicability

The buyer is liable formaking payment of a sum to the resident seller and related payment is to be make for the purchase of goods of the value/aggregate of the value exceeding INR 50 Lakhsin any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment by any mode, deduct an amount equal to 0.1 percent. 

Explanation-

buyers” means a person whose turnover, gross receipts or total sales from the business carried on by him crosses INR 10 CR during the financial year promptly preceding the financial year in which the purchase of goods is accomplished.

  • Rate of TDS
    1. If seller provide PAN:- TDS rate will be 1%.
    2. If seller do not provide PAN:- TDS rate will be 5%.
    3. If seller hasn’t filed, the ITR of two preceding PYs relevant to previous year in which tax is required to be deducted and the total of TDS&TCS is rupees Rs.50000/- or more in each of these two preceding PYs:- TDS rate will be 5%.
  • Time of deduction

TDS to be deducted on earlier of the following:

  1. Payment or
  2. Credit of such sum to the account of seller

For the purpose of credit to the seller account, it includes credit of sum to any “suspense account” or by any other name.

  • Non applicability
    1. Purchase from a person other than Resident.
    2. When Value or aggregate value of purchase transaction is 50Lakh or less than 50lakhs.
    3. Where turnover, gross receipts from business carried on by the buyer is 10Cr or less during the financial year immediately preceding the financial year in which the purchase of goods is carried out.
    4. tax is deductible under any of the provisions of this Act
    5. tax is collectible under the provisions of section 206C other thana transaction to which sub-section (1H) of section 206C applies(TCS).
    6. Buyer is a person excluded from the provision for deduction of tax as notified by Central Government.
  • Comparison between 194Q & 206C(1H):

 

Basis TDS on purchase of goods [Section 194Q] TCS on Sale of goods [Section 206C(1H)]
Who is liable for deduction/collection Buyer Seller
Turnover limit of deductor or collector Exceeding INR 10 CR during the financial year promptly preceding the financial yearin which the purchase of goods is accomplished. Exceeding INR 10 CR during the financial year promptly preceding the financial yearin which the purchase of goods is accomplished.
Threshold limit of purchase/sale If the value of purchase exceeds Rs. 50 lakhs If the value of sales exceeds Rs. 50 lakhs
Rate 0.1% 0.1%
Amount on which tax tobededucted/ collected On the amount of purchase in excess of Rs. 50 lakhs On the amount of sale consideration in excess of Rs. 50 lakhs
Time of deduction/collection At the time of credit or payment, whichever is earlier At the time of receipt
Preference to be given if both the section applies Purchaser is first liable to deduct the tax if the transaction could be subject to both provision Seller shall be liable to collect the tax only if the purchaser is not liable to deduct the tax or purchaser failed to deduct tax

This content is meant for information only and should not be considered as an advice or legal  opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CA Ruchika Gupta

AKGVG & Associates

 

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