Short overview of Clarification issued by CBDT on section 194Q

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Short overview of Clarification issued by CBDT on section 194Q 

CBDT has issued Circular No 13/2021 dated 30th June, 2021 wherein issues involved in Section 194Q has been clarified as under:

  1. Transactions in securities and commodities through defined recognised stock exchanges and recognised clearing corporation located in IFSC are exempt u/s 194Q.
  1. Transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges are exempt from provisions of section 194Q. This implies purchase of electricity which has been held as goods by Hon’ble SC are tax deductible u/s 194Q.
  1. TDS under section 194Q should be deducted net of GST, if charged separately. However for section 206C(1H) GST is to be included.
  1. In case of purchase returns, the extra TDS deduction is allowed to be adjusted against future supply of goods by the same seller. In case the goods are replaced by the seller for the same value, there is no need of any further adjustment.
  1. NRIs without permanent establishment are not covered U/S 194Q.
  1. Sec 194Q is not applicable, if either the seller or buyer is exempt from the provisions of income tax. Important to note that the entire income has to be exempt.
  1. Sec 194Q shall not apply to the 1st year of operations of an entity.
  1. Turnover of Rs 10Cr for applicability of Sec 194Q shall mean business receipts only and not salary, capital gains, interest income, etc.
  1. If an e-commerce operator deducts tax U/S 194O, Sec 194Q and Sec 206C(1H) shall not be applicable. If merely because the seller charges TCS U/S 206C(1H), Sec 194O shall still be applicable.
  1. If 194Q is applicable then section 206C(1H) shall not be applicable. If section 194-O and 194Q are not applicable section 206C(1H) will be applicable.

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