CBDT has vide Circular No. 13 of 2021 dated 30/06/2021 issued clarification on section 194Q and interplay of Section 194Q, 206C(1H) AND 194O.
Key Points:
1.
TDS on Amount Excluding GST
TDS under
section 194Q should be deducted exclusive of GST, if charged separately.
However for TCS on sale of goods – section 206C(1H), GST is to be included. In case, tax is deducted on advance payment
or on paid basis, tax has to be withheld on the amount including Gst since at
that point of time, it is not possible to segregate the Gst from invoice for
goods.
2. Purchase Return
In case of purchase return where TDS u/s. 194Q was done at the time of
purchase, TDS deduction is allowed to be adjusted against future supply of
goods by the same seller. In case the goods are replaced by the seller for the
same value, there is no need of any further adjustment.
3. Computation of Turnover limit
Turnover/ Gross receipts of 10 cror of buyer for applicability of this section
194Q will mean Turnover/ Gross receipts in business only/ from business
carried on by him. Hence, receipts by way of rent, interest, capital gain
etc if not considered as business income, are not to be included in calculating
the threshold of Rs.10 crores.
4. Cut off Transactions
TDS liability u/s. 194Q is either on payment or credit whichever is earlier. Therefore, if either of two events happened before 1st July, 2021, that transaction would not be subjected to provisions of Sec. 194Q of the Act.
5.
No TDS if tax already collected by seller u/s. 206C(1H)
If tax has
been collected by the seller under sub-section (I H) of section 206C of the
Act, before the buyer could deduct tax under section 194-Q of the Act on the
same transaction, such transaction would not be subjected to tax deduction
again by the buyer.
6. Not Apply in First year of incorporation
The provision of Section 194Q shall not to apply in first year of an entity, as
there is no turnover / gross receipts in the preceding year since the entity
was not in existence.
7. No TDS on import of goods
Non-resident without permanent establishment are not covered under the ambit of
section 194Q. Thus, no TDS deduction on the import of goods.
7. Exemption from TDS u/s. 194Q
(a) Transactions in securities and commodities through defined recognised
stock exchanges and recognised clearing corporations located in IFSC
(b) Transactions in electricity, renewable energy certificates and energy
saving certificates traded through power exchanges. However kindly note that
purchase of electricity which has been held as goods by Hon’ble SC is tax
deductible u/s 194Q.
(c) The provisions of Section 194Q of the Act shall not apply on purchase of
goods from a person, being a seller, who as a person is exempt from income tax