Coexistence of TDS 194Q and TCS 206C(1H) after Budget of 2021

Section 194Q – TDS on Purchase of Goods limits the scope and applicability of the Section 206C(1H) – TCS on Sale of Goods as the Second Proviso to Section 206C(1H) states that if the buyer deducts tax as per any other provision on the goods purchased by him, no tax shall be collected on the same transaction.

Let us go through both the provisions for better understanding and distinction-

PARTICULARS SECTION 194Q SECTION 206C(1H)
Purpose Tax to be deducted Tax to be collected
Applicability Buyer/Purchaser Seller
Counter party Resident Seller Resident Buyer
Trigger/Applicability point
  • Turnover/ Gross Receipt/ Sales from the business of BUYER should exceed Rs 10 Cr during the year (excluding GST)
  • Purchase of goods of aggregate value exceeding Rs.50L in P.Y.
  • Turnover/ Gross Receipt/ Sales from the business of SELLER should exceed Rs 10 Cr during the year (excluding GST)
  • Sale consideration received exceeds Rs.50L in P.Y.
Effective Date 1st July, 2021 1st October, 2020
Timing of tax deduction Payment or credit whichever is earlier At the time of receipt
Advances TDS shall be deducted on advance payment made TCS shall be collected on advance receipts
Rates
  • 0.1%
  • 5% (If PAN not available)
  • On amount exceeding Rs 50L
  • 0.1% (0.075% for FY 2020-21)
  • 1% (If PAN not available)
  • On amount exceeding Rs 50L
Not applicable to
  • Transactions on which TDS is applicable under other provisions of the act.
  • Transactions on which TCS is applicable under 206C other than 206C(1H).
Transaction on which TDS/TCS is applicable under other provisions of the act and the same has been complied with (Meaning thereby; in a situation where TDS has been deducted u/s 194Q this section will not apply)
Exclusion   Yet to be notified by Government        If buyer is –

  • Importer of goods
  • Center/State Govt., Local Authority
  • An embassy, High Commission, Consulate and trade representation of a foreign state
TAN requirement YES YES
When to deposit/collect
  • Tax so deducted shall be deposited with government by 7th day of subsequent month
  • Tax so collected shall be deposited with government by 7th day of subsequent month
Form 26Q 27EQ
Certificate to be issued to seller/buyer Form – 16A Form – 27D

 

Examples:

SN Buyer’s Turnover Seller’s Turnover Transaction Value Section Applicable
1 5Cr 12Cr 57Lakhs 206C(1H)
2 15Cr 11Cr 55Lakhs 194Q
3 11Cr 14Cr 52Lakhs 194Q
4 8Cr 5Cr 59Lakhs
5 11Cr 16Cr 47Lakhs

The triggering points have been highlighted in Amber

In a nutshell, it can be said that only if conditions of Sec 194Q are not satisfied and the sale of goods exceed Rs 50L where the seller’s TO in previous year is >Rs.10 Cr then Sec 206(1H) shall apply and TCS at the rate as specified.

Authored by – CA Anushka Saraogi

New Section 194Q – TDS on Purchase of Goods (Union Budget 2021)

 

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