Sec 194Q .......

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Gourav dewangan (Querist)
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19 November 2021 Suppose a Nagar Palika received fund from central government and state government in last year (FY 2020-21) amounting to Rs 15 Cr. Now Nagar palika purchase various goods from a supplier to do various work for his jurisdiction like repairing of road, electricity work, for laying of pipe etc. Suppose nagar Palika purchase goods amounting to Rs 60 Lacs from a supplier. Now my question is that weather that nagar palika deduct TDS u/s 194Q from that supplier considering Gross receipt/sales/turnover of nagar palika in last is more than 10Cr and purchase of goods from a seller is more than 50 Lacs. (Basicaly my question is that weather Sec 194Q is applicable to this type of government entry who received fund from Centre Government and State Government and other agencies and use this fund for the purpose for which fund is received (ie for General Publice)

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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19 November 2021 Yes, Municipality is liable to deduct TDS u/s. 194Q.

Gourav dewangan

Gourav dewangan (Querist)
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19 November 2021 Thanks for your valuable reply sir. But I am doubtful about sec 194Q applicability on municipality because as per section 194Q buyer is that person whose turnover/gross receipt/sales from business carried out by him is more than 10 Cr in last FY and municipality is not doing business. They receive fund from government and spend for general public. Hence sir please further clarify me.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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19 November 2021 As on today, there is no clarification on the issue. While word 'gross receipts' can have any such meaning...

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 November 2021 The much awaited clarification issued by ITD by Circular No. 20 of 2021
Dated 25th November, 2021
Subject: Guidelines under sub-section (4) of section 194-0, sub-section (3) of section 194Q and subsection (I-I) of section 206C of tile Income-tax Act, 1961 - reg.
Finance Act, 2020 inserted a new section 194-0 in the Income-tax Act 196 1 (here in after referred to as " the Act") which mandates .................
...." 5.4 Applicability of the provisions of section 194Q in case of department of Government not being a public sector undertaking or corporation
5.4.1 There have been representations from department of the Government (both Central Government and State Government), to inquire if such department is required to deduct tax under the provisions of section 194Q of the Act.
5.4.2 As per the provisions of section 194Q, tax is to be deducted by a person, being a buyer, whose total sales, gross receipts or turnover from business carried on by that person exceed TEN crore rupees during the financial year immediately preceding the financial year in which the goods are purchased by such person. Thus, for a person to be considered as a buyer for the purposes of section 194Q of the Act, following conditions a re required to be fulfilled:
(a) Such person shall be carrying out a business/ commercial activity;
(b) The total sales, gross receipts or turnover from such business/ commercial activity shall be more than Rs. 10 crore during the financial year immediately preceding the financial year in which goods are being purchased by such person.
In case of any Department of the Government which is not carrying out any business or commercial activity, the primary requirement for being considered as a 'buyer' will not be fulfill ed. Accordingly, such an organization will not be considered as 'buyer' for the purposes of section 194Q of the Act and will not be liable to deduct tax on the goods so purchased by them.
However, if the said department is carrying on a business /commercial activity, the provision of section 194Q of the Act shall apply subject to the fulfillment of other conditions.

Gourav dewangan

Gourav dewangan (Querist)
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26 November 2021 Thank you sir for more clarification

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 November 2021 My Pleasure ..

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