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 |
|
|
| 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 |
|
|
| Not applicable to |
| 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 –
|
| TAN requirement | YES | YES |
| When to deposit/collect |
|
|
| 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.