Tax Deducted at Source (TDS) on the purchase of goods and Tax Collected at Source (TCS) on the sale of goods: Applicability & Rates.

TDS on Purchase of Goods and TCS on Sale of Goods: Applicability and Rates Tax Deducted at Source (TDS) on the purchase of goods and Tax Collected at Source (TCS) on the sale of goods are crucial aspects of the revenue collection system. Section 194Q governs TDS on Purchase of Goods, while Section 206C(1H) regulates TCS on Sale of Goods. Distinguishing between these two provisions is essential for understanding when and how much tax is applicable under each. Comparison Basis: – Party Liable for Deduction/Collection: TDS applies to the buyer of goods, while TCS applies to the seller. – Effective Date: TDS on Purchase of Goods became effective on 1st July 2021, whereas TCS on Sale of Goods was implemented on 1st October 2020. – Applicability: TDS applies only to purchases from residents, while TCS applies solely to sales to residents. – Turnover Limit for Deductor/Collector: TDS applies if the buyer’s turnover exceeds Rs. 10 crores, whereas TCS applies if the seller’s turnover exceeds Rs. 10 crores. – Rate Applicable (with PAN): Both TDS and TCS are levied at a rate of 0.1% when PAN is available. – Rate Applicable (without PAN): TDS applies at 5.0%, and TCS at 1.0% when PAN is not provided. – Transaction Threshold: TDS applies when the purchase amount exceeds Rs. 50 lakhs, while TCS applies when the sales amount surpasses Rs. 50 lakhs. – Time of Deduction/Collection: TDS is deducted at the time of credit or payment, whichever is earlier, while TCS is collected at the time of receipt of sales consideration. – Time Period to Deposit/Collect: Both TDS and TCS must be deposited by the 7th of the subsequent month. – Preference to be Given: If a transaction could be subject to both provisions, the purchaser is first liable to deduct TDS. If the purchaser is not liable to deduct TDS or fails to do so, the seller becomes responsible for collecting TCS. – Quarterly Statement and Certificate Issued: For TDS, Form 26Q is filed, and Form 16A is issued. For TCS, Form 27EQ is filed, and Form 27D is issued. – Exemptions: TDS on Purchase of Goods is not applicable if tax is collectible under Section 206C other than 206C(1H) or if TDS is deductible under any other section. Conclusion: Understanding the specific applicability criteria and rates of TDS on Purchase of Goods and TCS on Sale of Goods is crucial for taxpayers. Knowing the responsible party for deduction or collection, turnover thresholds, and applicable rates enables compliance with these tax provisions, streamlining the tax process and averting potential legal complications.