TMI BlogGuidelines under section 194Q of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... Government has been authorised to specify by notification in the Official Gazette. person who would not be considered as buyer for the purposes of this section. 3. Sub-section (3) of section 194Q of the Act empowers the Board (with the approval of the Central Government) to issue guidelines for the purpose of removing difficulties. Various representations have been received by the Board for issuing guidelines for removing certain In exercise of power contained under sub-section (3) of section 194Q of the Act. the Board, with the approval of the Central Government, hereby issues the following guidelines. These guidelines at some places have also tried to remove difficulties in implementing the provisions of section 194-O and sub-section (1H) of section 206C of the Act using power contained in sub-section (4) of section 194-O of the Act and sub-section (1-I) of section 206C of the Act. 4. Guidelines 4.1 Applicability on transactions carried through various Exchanges: 4.1.1 It has been represented that there are practical difficulties in implementing the provisions of Tax Deduction at Source (TDS) contained in section 194Q of the Act in case of certain exchanges and clearing corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l credit or payment during the previous year, on or after is 1st July 2021, to such seller. 4.3 Adjustment for GST , purchase returns 4.3.1 It is requested to clarify that whether adjustment is required to be made for GST or purchase returns for the purpose of tax deduction under section 194Q of the Act. Vide circular no 17 of 2020 dated 29th Sept 2020 it was clarified that no adjustment on account of GST is required to be made for collection of tax under sub-section (1H) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration. However, the situation is different so far as TDS is concerned. It has been clarified in circular no 23 of 2017 dated 19th July 2017 as under wherever in terms of the agreement or contract between the payer and the payee, the component of GST on services comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid or payable without including such GST on services component. GST for these purposes shall include Integrated Goods and Services Tax., Central Goods and Services Tax, State Goods and Services Tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o as a person is exempt from income tax under the Act (like person exempt under section 10) or under any other Act passed by the Parliament (Like RBI Act, ADB Act etc.). 4.5.2 Similarly, with respect to sub-section (1H) of section 206C of the Act, it is clarified that the provisions of this sub-section shall not apply to sale of goods to a person, being a buyer, who as a person is exempt from income tax under the Act (like person exempt under section 10) or under any other Act passed by the Parliament (Like RBI Act, ADB Act etc.). 4.5.3 The above clarifications would not apply if only part of the income of the person (being a seller or being a buyer. as the case may be) is exempt. 4.6 Whether tax is to be deducted on advance payment? 4.6.1 It is requested to clarify if the provisions of section 194Q of the Act shall apply to advance payment made by the buyer. It is clarified that since the provisions apply on payment or credit whichever is earlier, the provisions of section 194Q of the Act shall apply to advance payment made by the buyer to the seller. 4.7 Whether provisions of section 194Q of the Act shall apply to buyer in the year of incorporation? 4.7.1 It is requested to clari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply to a transaction on which‑ (i) tax is deductible under any of the provisions of this Act; and (ii) tax is collectible under the provisions of section 206C , other than a transactions on which sub-section (1H) of section 206C applies 4.9.5 After conjoint reading of all these provisions the following is clarified: (i) If tax has been deducted by the e-commerce operator on a transaction under section 194-O of the Act [including transactions on which tax is not deducted on account of sub-section (2) of section 194-O ]. that transaction shall not be subjected to tax deduction under section 194Q of the Act. (ii) Though sub-section (1H) of section 206C of the Act provides exemption from TCS if the buyer has deducted tax at source on goods purchased by him, to remove difficulties it is clarified that this exemption would also cover a situation where instead of the buyer the e-commerce operator has deducted tax at source on that transaction of sale of goods by seller to buyer through e-commerce operator. (iii) If a transaction is both within the purview of section 194-O of the Act as well as section 194Q of the Act, tax is required to be deducted under section 194-O of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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