Short Overview of the CBDT Recent Guidelines on Applicability of TDS & TCS U/s 194Q, 194-O & 20C(1H)

Short Overview of the CBDT Recent Guidelines on Applicability of TDS & TCS U/s 194Q, 194-O & 20C(1H)

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Short Overview of the CBDT Recent Guidelines on Applicability of TDS & TCS U/s 194Q, 194-O & 20C(1H)

I. Exclusion to E-Auctioneer
The provisions of section 194-0 of the Act shall not apply in relation to e-auction activities carried out by e-auctioneers if: 
(a) The e-auctioneer conducts e-auction services for its clients in its electronic portal and is responsible for the price discovery only which is reported to the client.
(b) The price so discovered through e-auction process is not necessarily the price at which the transaction takes place and it is up to the discretion of the client to accept the price or to directly negotiate with the counter-party.
(c) The transaction of purchase/sale takes place directly between the buyer and the seller party outside the electronic portal maintained by the e-auctioneer and price discovery only acts as the starting point for negotiation and conclusion of purchase/sale.
(d) The e-auctioneer is not responsible for facilitating the purchase and sale of goods for which e- auction was conducted on its electronic portal except to the extent ofprice discovery.
(e) Payments for the transactions are carried out directly between the buyer and the seller outside the electronic portal and the e-auctioneer does not have any information about the quantum and the schedule of payment which is decided mutually by the client and the counterparty.
(f) For payment made to e-auctioneer for providing e-auction services, the client deducts tax under the relevant provisions of the Act other than section 194-0 of the Act.
II. Applicability on Component of VAT/Sales tax/Excise duty/CST,
In case of purchase of goods which are not covered within the purview of GST, when tax is deducted at the time of credit of amount in the account of seller and in terms of the agreement or contract between the buyer and the seller, the component of VAT/Sales tax/Excise duty/CST, as the case may be, has been indicated separately in the invoice, then the tax is to be deducted under section 194Q of the Act on the amount credited without including such VAT/Excise duty/Sales tax/CST, as the case may be.
However, if the tax is deducted on payment basis, if it is earlier than the credit, the tax is to be deducted on the whole amount as it will not be possible to identify the payment with VAT/Excise duty/Sales tax/CST component to be invoiced in the future.
III. TDS on Goods used in a Manufacturing Process which doesn’t attract TCS:
Since by virtue of sub-section ( IA) of section 206C of the Act, the tax is not required to be collected in cases where the goods are used in manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes, in such cases, the provisions of section 194Q of the Act will apply and the buyer shall be liable to deduct tax under the said section if the conditions specified therein are fulfilled.
IV. Goverment not to be treated as seller for 194Q:
For the purposes of section 194Q, Central Government or State Government shall not be considered as ‘seller’ and no tax is to be deducted by the buyer, in cases where any Department of Central or State Government are seller of goods.

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