TDS or TCS is applicable on purchase or sale of Goods above 50 lakh or Both? - After this amendment.
Summary:- if the purchaser turnover is more than 10 Crores, then the purchaser is liable, if not then the Seller is liable. you can see the table below for easy understanding.
The question that arises is whether TCS u/s 206C (1H) of Income Tax is to be collected on sales of goods above 50 lakh as amended by Budget 2020 or TDS u/s 194Q is to be deducted by the buyer as proposed in Budget 2021?
The Budget 2021, Introduced New Section 194Q, which read as follows :-
Sec 194Q. (1) Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax. Explanation.--For the purposes of this sub-section, "buyer" means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
(2) Where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
(3) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
(4) Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income tax authorities and the person liable to deduct tax.
(5) The provisions of this section shall not apply to a transaction on which-- (a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.
The section 206C (1H) which is already part of income tax act which deals which TCS on sales of goods above 50 lakhs @ 0.1% cast responsibility of seller of goods to collects TCS at the time of collection above 50 lakhs.
Section 206C(1H) reads as follows:-
Section 206 C (1H) Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax:
Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words "five per cent", the words "one per cent" had been substituted:
Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.
As a tax payer, which section should be followed
(1) TDS u/s 194Q - to deduct TDS of 0.10% on purchase above 50 lakhs
(2) TCS u/s 206C (1H) - to collect TCS @ 0.10% on sales above 50 lakh
Now big question is who is responsible Buyer or seller or both?
Post budget 2021, buyer will be mainly responsible to deducted TDS on purchase above 50 lakhs [ if the purchaser has turnover above 10 crore in previous financial year] @ 0.1% and seller is now not responsible to collect TCS from Buyer @0.1% this can be understood by Budget 2021 section 194Q (5) which reads(5) The provisions of this section shall not apply to a transaction on which-- (a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies
Its to be noted that TDS is compulsorily deducted by buyer on purchase of goods above 50 lakh [ if the purchaser has turnover above 10 crore in previous financial year] and if he fails to do so then only seller has to collect TCS [ as per 2nd proviso to section 206C (1H)] on sales exceeding 50 lakh at 0.10%. Further, as per section 40(a) (ia) 30% of purchase amount will be disallowed while calculating computing the income of the previous year in case buyer fails to deduct TDS on purchase above 50 lakh.
We can understand this through this table:-