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∼

Section 194LBB – Income in respect of units of the Investment Fund

Examples:

∼Authored by – CA Anushka Saraogi∼

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