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TDS applicability of section 194Q on payment for coal

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CA Rakesh Roshan Nayak

41 Points Posted on 28 January 2022

As TDS provision of 194Q was applicable from 1.7.21. Coal is subject to TCS, however by submitting Form 27C, TCS was exempted. As TCS provision was applicable, TDS under 194 Q was not deducted. However, CBDT vide circular dt 25.11.21 clarified that when TCS is exempted vide Form 27C, TDS under 194Q will be applicable. Now, provision of 194Q was applicable since July 2021 but CBDT clarification came on 25 November 2021. whether non deduction of TDS from July 2021 to November 2021 will amount to be non compliance and interest will be charged ?

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Quick Summary

This discussion clarifies the applicability of TDS under Section 194Q on payments for coal. While coal is typically subject to TCS, an exemption via Form 27C was possible. A CBDT circular in November 2021 stated that if TCS is exempted, TDS under 194Q becomes applicable. The key question is whether non-deduction of TDS between July and November 2021, before the clarification, constitutes non-compliance and incurs interest.