194Q Vs. 206C(1H) of the Income Tax act, 1961

CA Preksha Choraria | Last updated: 07 February 2021

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Quick Summary

The Finance Bill, 2021 introduced Section 194Q for TDS on goods purchases, which is similar to Section 206C(1H) for TCS on goods sales introduced earlier. This article clarifies the potential ambiguity for businesses regarding their simultaneous application. It details key differences in purpose, applicability, triggering points, timing, rates, and exclusions for both sections.

194Q versus 206C(1H) of the Income Tax act, 1961

The Finance Bill, 2021 has introduced section 194Q - TDS on purchase of goods which is having resemblance to section 206C(1H)- TCS on Sale of Goods brought in by Finance Bill, 2020. There is ambiguity regarding their simultaneous applicability to businesses, which is explained as under:

194Q vs 206C(1H): TDS vs TCS on Goods Purchases

	194Q	206C(1H)
Particulars	Remarks
Purpose	Tax to be DEDUCTED	Tax to be COLLECTED
Applicable to	Buyer/Purchaser	Seller
Counter party	Resident Seller	Resident Buyer
Triggering point	Turnover/Gross Receipts/Sales from the business of BUYER should exceed Rs.10cr during previous year (Excluding GST) Purchase of goods of aggregate value exceeding Rs.50Lakhs in P.Y. (The value of goods includes GST)	Turnover/Gross Receipts/Sales from the business of SELLER should exceed Rs.10cr during previous year (Excluding GST) Sale consideration received exceeds Rs.50Lakhs in P.Y. (The value of goods includes GST)
W.e.f	01/07/2021	01/10/2020
Timing	Payment or credit, whichever is earlier	At the time of receipt
Advances	TDS shall be deducted on advance payments made	TCS shall be collected on advance receipts
Rate of TDS/TCS	0.1%	0.1% (0.075% for FY 2020-21)
PAN not available-Rate of TDS	5%	1%
On which amount	On amount exceeding Rs.50 Lakhs	On amount exceeding Rs.50 Lakhs
Not applicable to	Transactions on which TDS is applicable under other provisions of the act Transactions on which TCS is applicable under section 206C other than 206C(1H)	Transactions 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)
Exclusions	Yet to be notified by government	If Buyer is- Importer of goods Central/State Government, Local Authority An embassy, High Commission, legation, 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 7^th day of subsequent month	Tax so collected shall be deposited with government by 7^th day of subsequent month
Quarterly statement to be filed	26Q	27EQ
Certificate to be issued to seller/buyer	Form 16A	Form 27D

Example:

Sr No.	Buyers Turnover	Sellers Turnover	Transaction Value	Section Applicable
1	5Cr	11Cr	55Lakhs	206C(1H)
2	15Cr	7Cr	58Lakhs	194Q
3	12Cr	13Cr	54Lakhs	194Q
4	7Cr	5Cr	58Lakhs	NA
5	12Cr	15Cr	45Lakhs	NA

The views expressed above are of the author and does not intent for any professional guidance.

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About the Author

CA Preksha Choraria

CA-Practicing

* Chartered Accountant *Experience in Direct, Indirect taxation, Company Audit, ROC Compliances, Trust, GST and Government GST and finalisationfor 6 years * Secured AIR 19 in CA Finals conducted by ICAI, November 2014 * Secured AIR 11 in CA IPCC conducted by ICAI, November 2011 * Secured 2 Rank in Gujarat, CA C ... Read more

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