Tax to be deducted at source by the buyer while making payment to the seller in respect of purchase of goods.

Tax has to be deducted by the buyers whose turnover/ gross receipts exceeds Rs.10 crores (Excluding GST) during the previous year.

Tax has to be deducted if the aggregate value of purchase in the financial year exceeds Rs. 50 Lakhs (Including GST)
Tax has to be deducted only on the sum exceeding Rs. 50 lakhs

At the time of credit of such sum or at the time of payment, whichever is earlier.

TDS shall be deducted at the rate of 0.1% on the amount exceeding Rs. 50 Lakhs.
If PAN is not furnished by the seller, the buyer shall deduct TDS at the rate of 5% on the amount exceeding Rs. 50 Lakhs

CBDT has not issued any clarification in this regard
As per Section 194Q, tax has to be deducted on the amount exceeding Rs. 50 Lakhs if the aggregate value of purchase (Including GST) exceeds Rs. 50 lakhs.
However, there are cases where the value of purchase exceeds 50 lakhs only because of the GST component.
For eg,
1. Purchase value = Rs. 49 Lakhs
2. GST @ 18% = Rs. 8.82 Lakhs
3. Total invoice value = Rs. 57.82 Lakhs
In this case, should tax be deducted? if yes, on what amount?
1. In the given case, even though the amount of payment exceeds Rs. 50 lakhs and the buyer becomes eligible to deduct tax under section 194Q on the amount exceeding Rs. 50 Lakhs.
2. It has to be noted that the amount in excess of the Rs. 50 lakhs is purely a GST component and not the actual purchase value.
3. Since tax need not be deducted on the GST component, no TDS needs to be deducted in this case even though the buyer becomes eligible to deduct TDS under section 194Q.

FAQ’s on TDS under Section 194Q

Table of Contents