194C - Payment to GTA

This query is : Resolved

M.Sathish Kumar (Querist)
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09 February 2024 Background:
This is basically a logistics company, we engage X Transporter for shipping goods from location A to B. We pay freight to X Transporter.

In turn, X Transporter will find the available vehicle in the market, lets say Y Transporter. X transporter will pay Y.

We dont involve Y Transporter at all and we deal with X Transporter only. X Transporter does not own any vehicle and Y transporter owns vehicle.

Since, I dont involve Y Transporter, shall I get the declaration from X Transporter since he (X tranporter) is not owning more than 10 vehicles and will pay X Transporter without deduction of tax at source.

Is it permitted under 194C? please let me and if you have any legal backing please share it with me.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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06 July 2024 Under Section 194C of the Income Tax Act, 1961, tax deduction at source (TDS) is applicable on payments made for carrying out any work, including transportation of goods. Here’s how it applies to your scenario:

### Understanding Section 194C:

1. **Applicability:**
- Section 194C applies to payments made to contractors or subcontractors for carrying out any work, which includes transportation services.

2. **Contractor Definition:**
- In your case, X Transporter acts as a contractor who arranges for transportation services from Y Transporter.

3. **TDS Requirement:**
- Normally, TDS at the rate of 1% is applicable on payments made to contractors for transportation services under Section 194C, if the payment exceeds Rs. 30,000 in a single payment or Rs. 1,00,000 aggregate in a financial year.

### Specifics in Your Scenario:

- **X Transporter (Contractor):**
- X Transporter, as a contractor, arranges transportation services from Y Transporter.
- They are responsible for ensuring compliance with TDS provisions if applicable.

- **Y Transporter (Subcontractor):**
- Y Transporter owns the vehicle and performs the transportation service.
- Although you do not directly engage with Y Transporter, X Transporter arranges and pays Y Transporter.

### Declaration and Exemption:

- **Declaration from X Transporter:**
- If X Transporter is not liable for TDS because they do not own more than 10 goods carriages and meet other specified conditions, they can provide you with a declaration under Section 194C(6) to this effect.

- **Legal Backing:**
- The exemption from TDS under Section 194C(6) for transporters who do not own more than 10 goods carriages is provided to simplify compliance for small transporters. This exemption is legally recognized and allows such transporters to receive payments without deduction of TDS.

### Conclusion:

Based on the provided details, you should:
- Obtain a declaration from X Transporter confirming their eligibility under Section 194C(6) for exemption from TDS.
- Ensure that X Transporter is compliant with all applicable tax laws and maintains records as required.