Guidelines under sub-section (4) of section 194-O, sub-section (3) of section 194Q and sub-section (1-I) of section 206C of the Income-tax Act, 1961

Last updated: 26 November 2021

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This circular provides updated guidelines on sections 194-O, 194Q, and 206C of the Income-tax Act, 1961. It clarifies the applicability of these sections in various scenarios, including e-auction services, the treatment of non-GST state levies, and situations involving government departments. The aim is to remove difficulties and provide clarity for taxpayers.

F.No. 3701422/56/2021-TPL Government of India Ministryof Finance Department of Revenue Central Hoard ofDirect Taxes (TM,Division) Circular No. 20 of 2021 Dated 25thNovember,2021 Subject: Guidelines under sub-section (4) of section 194-0, sub-section (3) of section 194Q and subsection (1-I) of section 206C of the Income-tax Act, 1961 -reg. Finance Act, 2020 inserted a new section 194-0 in the income-tax Act 1961 (hereinafter referred to as the Act) which mandates that with effec

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FAQ :

This circular issues guidelines to remove difficulties and provide clarity regarding the provisions of sub-section (4) of section 194-O, sub-section (3) of section 194Q, and sub-section (1-I) of section 206C of the Income-tax Act, 1961.

The provisions of section 194-O do not apply to e-auction activities if the e-auctioneer only facilitates price discovery, the transaction is directly between buyer and seller outside the portal, payments are made directly between buyer and seller, and the e-auctioneer is not responsible for facilitating the sale itself.

For goods not covered by GST, if VAT, Sales Tax, Excise Duty, or CST are separately indicated in the invoice and tax is deducted at credit, tax is deducted on the amount excluding these levies. If tax is deducted on payment basis (earlier than credit), it's deducted on the whole amount.

Yes, if tax is not required to be collected under sub-section (1) or (1H) of section 206C due to an exemption under sub-section (1A), then the provisions of section 194Q will apply, and the buyer must deduct tax if the conditions are met.

Government departments are not liable to deduct tax under section 194Q if they are not carrying out any business or commercial activity. If they are engaged in business or commercial activity and meet the turnover criteria, they will be considered a 'buyer'.

No, Central Government or State Government departments are not considered 'sellers' for the purposes of section 194Q, and buyers are not required to deduct tax when purchasing goods from them.