The Central Board of Direct Taxes (CBDT) Wednesday clarified that buyers would need to deduct tax at source at 0.1% of amount exceeding Rs 50 lakh when paid or credited to a resident seller on transactions after July 1, 2021, under section 194Q of the income tax Act which comes into effect from July 1.
The Board has specifically pinpointed that the limit of Rs 50 lakhs for the purpose of triggering TDS shall be calculated from April 1, 2021, and the GST component shall have to be set apart at the time of credit. The Board further put a clarification that if a transaction comes within the purview of TDS under both section 194O (applicable in case of e-commerce operators) and section 194Q of the aforesaid Act, deduction shall have to be made as per section 194Q.
Furthermore, when there is a confrontation between the provision of TDS and the provision of TCS wherein goods are sold as per section 206C(1H), provisions of TDS shall apply.
According to a circular issued by the Board Wednesday, buyer has been defined as a person whose total sales or gross receipts or turnover from the business carried on by him exceed Rs 10 crore during the financial year immediately preceding the financial year in which the purchase of good is carried out.
The circular highlighted that when tax is deducted at the time of ‘credit’, TDS under 194Q shall be deducted on amount credited without including the GST component, but if tax is deducted on payment basis then TDS would have to be deducted on the whole amount since it would not be possible to identify the GST component.
Additionally, it has been clarified that while the new provisions shall apply on advance payment, the same shall not be applicable to a non-resident whose purchase of goods is not connected with permanent establishment (PE) of such non-resident in India.
