TCS Under 206 C 1H or TDS under section 194Q

[kannaiyan gajendra]

While invoicing, we are collecting TCS from customer under section 206C1H so far effective from 01.10.20. Since New section introduction of 194Q effective from 01.07.21, few customers are demanding us to not collect TCS and they will deduct TDS from us on Purchase of goods under section 194Q and they will provide declaration for that..

In this juncture, Kindly advice based on declaration we can stop to collect TCS or not?. iF any alternative kindly let me know

[SayadAziz Ahmad]

(A) TCS u/s 206C(1H) is applicable if seller turnover>10cr and buyer turnover<10cr in preceeding fy and its sales to a particular customer during the fy >50lakhs it should charge TCS in its invoices to the concerned buyer.

(B) If buyer turniver>10cr and seller turnover<10cr and all other conditions are same as in (A) above then buyer will deduct TDS u/s 194Q

(C) if buyer and seller both turnover>10 cr, sec 194Q will be applicable and buyer will deduct TDS u/s 194Q.

[kannaiyan gajendra]

Thank you so much for your reply

[Ganeshan Kalyani]

The conditions of both the sections are same. And out of both, Section 194Q prevails. That means you can stop collecting TCS as your buyer will be deducting TDS..

AI Summary

TDS under section 194Q governs competing TCS obligations; buyer deduction displaces seller's TCS collection when conditions are met. Section 206C(1H) requires the seller to collect TCS when the seller meets the turnover criterion and sales to a buyer in the year exceed the sales threshold, provided the buyer's turnover is below the threshold. Section 194Q requires the buyer to deduct TDS when the buyer meets the turnover criterion; where both parties exceed the turnover threshold, section 194Q applies and the buyer's TDS obligation displaces the seller's TCS collection.