[Opinion] Interplay Between Various Provisions Relating to TDS

CA Vinay V. Kawdia – [2023] 149 taxmann.com 284 (Article)

Background

There are various provisions relating to TDS under the Income Tax Act, 1961 which, at times appears to be conflicting or overlapping. However there are thin lines of differences amongst the said provisions and we have to read between the lines to understand the same. Many times CBDT issues clarificatory circulars to avoid the conflicts between/overlapping of various TDS related provisions as applicable to same transaction.

In this writeup, I have tried to summarize the interplay between some of the important provisions relating to TDS, which prima facia appears to be conflicting or overlapping:

(1) S. 194Q vs. S. 206C(1H): TDS on purchases vs. TCS on sale of goods

Section 194Q: A Buyer purchasing any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year and having his/her turnover from business in excess of Rs. 10 crores, in immediately preceding financial year, from a resident seller, is liable to deduct TDS u/s 194Q @ 0.1% at the time of credit or payment of such sum, whichever is earlier, in excess of Rs 50 lakhs.

S. 206C(1H): 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)] and having his/her turnover from business in excess of Rs. 10 crores, in immediately preceding financial year, shall, at the time of receipt of such amount, collect from the buyer, TCS @ 0.1% of the sale consideration exceeding fifty lakh rupees.

Interplay between S. 194Q vs. S. 206C(1H):

If a transaction is both within the purview of section 194-Q of the Act as well as sub-section (l H) of section 206C of the Act, the tax is required to be deducted under section 194-Q of the Act. The transaction shall come out of the purview of sub-section (1H) of section 206C of the Act after tax has been deducted by the buyer on that transaction. Once the buyer has deducted the tax on a transaction, the seller is not required to collect the tax under sub-section (IH) of section 206C of the Act on the same transaction. However, if, for any reason, tax has been collected by the seller under sub-section (IH) of section 206C of the Act, before the buyer could deduct tax under section 194-Q of the Act on the same transaction, such transaction would not be subjected to tax deduction again by the buyer. This concession is provided to remove difficulty, since tax rate of deduction and collection are same in section 194Q and sub- section (IH) of section 206C of the Act.

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