TDS U/S 194Q ON PURCHASE FROM KACHHA ARTIYA

[umeshkumar jhawar]

'A Person Has , Let's Say Mr A, Turnover Above 10 Crore In AY 2021-22. He Is A Trader In The Grain Market. Mr A Buys Goods From Agent I.E. Kacha Adatiya. This Agent Acquires Goods From The Different Farmers In The Gram Market. Agent Issues A Sale Bill To Mr A In Which He Charges The Cost Of The Goods, Commission And GST. Mr A Does Not Know Who The Actual Seller Is, He Only Knows The Agent. The Agent Reports Only Commission Income In His Books Of Account And The Cost Of The Goods He Charges In The Bill Gets Adjusted Against The Farmer's Payment. Hence, The Cost Of Goods is Not Turnover/Sale Income For Him. Now My Question Is From View Point Of Buyer I.E. Mr A: 'Whether He Is Required To Deduct TDS U/S 194Q On Cost Of Goods Paid To The Agent? He Already Deducts TDS U/S 194H On Commission Paid To The Agent.'

[GUNASEKARAN K]

As per my understanding about you query;

Your client's turnover exceeds 10 crores hence any amount paid / credited exceeds 50 lakhs then he is liable to deduct TDS U/s 194Q on value of Goods less Commission amount which liable to deduct TDS U/s 194H.

Simply;

TDS U/s 194Q to be deducted on Goods Value.

No TDS U/s 194Q on Commission Portion which liable to deduct TDS under another section.

[Padmanathan KV]

if the goods dealt are agricultural goods and the seller is exempt from tax under section 10(1) being agriculture income, you can take shelter under 'Guidelines under section 194Q of Income tax Act, 1961' under Circular 13 of 2021, which clarified as below:

4.5 Whether tax is to be deducted when the seller is a person whose income is exempt

4.5.1 It is requested to clarify if the provisions of section 194Q of the Act shall apply to a seller whose income is exempt. To remove difficulty, it is clarified that 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.).

4.5.2 Similarly, with respect to sub-section (1H) of section 206C of the Act, it is clarified that 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.).

4.5.3 The above clarifications would not apply if only part of the income of the person (being a seller or being a buyer. as the case may be) is exempt.

Practically, you can get a certificate from the commission agent that the farmers from whom goods are procured are agriculturist and eligible for exemption under section 10(1) [whereever applicable] in respect of the sale produce.

Further, there is a specific representation given by the Adoni Groundnut, Cotton & Kappas Commission Agents Association.

However, I have not seen any specific clarification from the Government on the same.

AI Summary

TDS on purchase of goods may apply to buyers, excluding commission subject to other TDS provisions. A buyer purchasing through a commission agent must generally withhold tax on the goods value under section 194Q, excluding the commission portion which is subject to separate withholding; however, administrative guidance excludes purchases from sellers who are tax exempt (for example, agricultural income exempt under the statute), and obtaining a certificate from the agent confirming sellers' exempt status is a practical step.