Current Modifications in TCS/TDS on Sale-Buy of Items

The Finance Act, 2021 launched the next three adjustments within the Revenue Tax Act regarding tax deduction at supply (“TDS”) or assortment of tax at supply (“TCS”), with impact from July 1, 2021, for sale-purchase of products , Pension revenue of eligible senior residents and accelerated TDS charges for non-filers.

This text offers with the latest adjustments in TCS/TDS guidelines on sale-purchase of products underneath part 54 of the Finance Act, 2021, with the insertion of latest part 194Q within the Revenue-tax Act, 1961 (“IT Act”), i.e. tax deducted at supply on fee of specific amount for buy of products. Accordingly, adjustments had been made within the Revenue-tax Guidelines, 1961 (“IT Guidelines”) vide Notification No. 71/2021 dated June 08, 2021.

Just like part 206C(1H) of the IT Act launched underneath the Finance Act, 2020 to levy TCS on the sale of products, part 194Q of the IT Act has been launched to deduct TDS on the acquisition of products.

As per the stated part 194Q, the customer is liable to deduct TDS of the vendor (resident) on the acquisition of products on the time of fee or on the time of credit score, whichever is earlier. Nonetheless, TDS isn’t required to be deducted if:

• The customer’s whole gross sales/gross receipts/turnover is lower than Rs. 10 crore within the previous monetary 12 months (“Monetary 12 months”);
• Items of combination worth of lower than Rs. 50 lakh (internet of GST) was bought by the customer from such resident vendor through the related monetary 12 months;
• The customer is liable to deduct TDS underneath another provision of Chapter XVII of the IT Act;
• Vendor is liable to gather TCS underneath any provision of TCS besides Part 206C(1H) of IT Act the place each Part 194Q and 206C(1H) of IT Act are relevant and solely purchaser will deduct TDS and vendor will deduct TCS shall not be liable to gather

It could be famous that TDS underneath part 194Q is triggered when the mixture worth of purchases comprised of a resident vendor exceeds Rs. 50 lakhs and the customer is liable to deduct TDS on the worth of buy of products above Rs. 50 lakh solely. For instance, if the worth of the products bought is Rs. TDS to be deducted on Rs 70 lakh. 20 lakh solely. Additional, TDS is to be deducted from July 01, 2021, nevertheless, for its applicability the entire purchases are to be thought-about with impact from April 01, 2021, which suggests for deduction of Rs. 50 lakh from the provider is to be reckoned with impact from April 01, 2021.

As per the modification within the provisions of part 206AA, if the vendor doesn’t present PAN, the relevant price of TDS underneath part 194Q can be 5% as an alternative of 0.1%.

As per the provisions of newly inserted part 206AB, in case of sellers who haven’t filed their revenue tax return for the final two evaluation years and have deducted TDS for greater than Rs. 50,000/- in such circumstances additionally the speed of TDS underneath part 194Q can be 5%.

Price at which TDS can be deducted:

CBDT, vide round No. 13/2021 (“Round No. 13”) dated June 30, 2021, clarified that TDS is required to be deducted on quantities paid or payable with out together with such GST on companies.

The creator of this text is Mr. Sanjay Agarwal, President of PHD Chamber

The views and opinions expressed aren’t these of IIFL Securities,

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