12 Key takeaways from the CBDT circular are: 1. Transactions in securities and commodities through defined recognised stock exchanges and recognised clearing corporation located in IFSC are exempt u/s 194Q. 2. Transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges are exempt from provisions of section 194Q. This implies purchase of electricity which has been held as goods by Hon’ble SC are tax deductible u/s 194Q. The manufacturing units or the service providers paying electric bills above Rs.50 lacs purchased by the defined buyers are covered under provisions of section 194Q. 3. Any sum paid/ credited by buyer from 1st April to 30th June 2021(both days inclusive) shall not be counted for tax deduction u/s 194Q. 4. On similar lines of the clarification issued on 29th September 2020 on purchase of goods u/s 206C(1H), similar clarification is addressed on whether to include Gst while tax withholding or no. Its clarified that the TDS under section 194Q should be deducted net of GST, if charged separately. However for section 206C(1H) GST is to be included. In case, tax is deducted on advance payment or on paid basis, tax has to be withheld on the amount including Gst since at that point of time, it is not possible to segregate the Gst from invoice for goods. 5. In case of purchase return, which happens after TDS has already been deducted u/s 194Q, the extra tds deduction is allowed to be adjusted against future supply of goods by the same seller. In case the goods are replaced by the seller for the same value, there is no need of any further adjustment. In case of any extra supply of goods or of some higher value than the purchase returned value, extra applicable tds need to be deducted by the buyer. 6. Non-resident without permanent establishment are not covered under the ambit of section 194Q. Thus, no tds deduction on import of goods. 7. The provisions of Section 194Q of the Act shall not apply on purchase of goods from a person, being a seller, 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.). Similarly, 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.). The above provisions shall apply only the full income is exempt. The provisions of section 194Q and section 206C(1H) shall apply if only part income is exempt. 8. Further provision of section 194Q not to apply in first year of an entity as no turnover / gross receipts in preceding year since entity was not in existence. 9. Turnover/ Gross receipts of 10 crore of buyer for applicability of this section 194Q will mean Turnover/ Gross receipts in business only/ from business carried on by him. Hence receipts by way of rent, interest , capital gain etc if not considered as business income, are not to be included in calculating the threshold of Rs.10 crores. 10. Hierarchy of section 194O, 194Q and Section 206C(1H) clarified. If section 194-O is applicable to a transaction then 194Q and 206C(1H) will not apply. If 194Q is applicable then section 206C(1H) shall not be applicable. If section 194-O and 194Q are not applicable section 206C(1H) will be applicable. 11. The primary responsibility is on e-commerce operator to deduct the tax under section 194-0 of the Act and that responsibility cannot be condoned if the seller has collected the tax under sub-section (I H) of section 206C of the Act. This is for the reason that the rate of TDS under section 194-0 is higher than rate of TCS under sub-section (I H) of section 206C of the Act. 12. If tax has been collected by the seller under sub-section (I H) 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 subsection (IH) of section 206C of the Act.
02 February 2022
It seems you have not considered the explanation given by CBDT for TDS u/s. 194Q. Herewith I would give extract from FAQ over the issue....
FAQ 11. Whether TDS is required to be deducted on the transaction in electricity? Ans: Section 194Q provides for the deduction of tax on the payment made for the purchase of goods. The Apex Court in the case of State of Andhra Pradesh v. National Thermal Power Corporation (NTPC) (2002) 5 SCC 203, held that electricity is a movable property though it is not tangible. It is 'good'. Further, the Custom Tariff Act has covered 'Electricity' under heading 2716 00 00, which also clarifies that Electricity is a good. Thus, it may be concluded that the tax should be deducted from the payment made in respect of the transaction in electricity. A transaction in electricity can be undertaken either by way of direct purchase from the company engaged in generation of electricity or through power exchanges. The CBDT has clarified that the transaction in electricity, renewable energy certificates and energy-saving certificates traded through power exchanges registered under Regulation 21 of the CERC shall be out of the scope of TCS under the provision of Section 206C(1H). Applying the rationale behind such clarification, it is apprehended that the CBDT may allow a similar exemption from TDS under Section 194Q as well.
For more clarity, let me state that MGVCL is a power distributing company, registered under Regulation 21 of CERC.