TDS u/s 194Q not to be deducted on GST/VAT/CST etc. separately indicated on Invoice: CBDT Clarifies

Central Board of Direct Taxes [CBDT] has received Various Representations from various stakeholders involved in the business to issue 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 in order to remove difficulties.

In continuation of the above, to further remove the difficulties, the Board, with the approval of the Central Government, hereby issues the following guidelines under sub-section (4) of section 194-0, subsection (3) of section 194Q and sub-section (I-I) of section 206C of the Act.  

Adjustment of various state levies and taxes other than GST

In Para 4.3.2 of circular no. 13 of 202 1 dated 30.06.202 1, it has been provided that in case the GST component has been indicated separately in the invoice and tax is deducted at the time of credit of the amount in the account of the seller, then the tax is to be deducted under section 194Q of the Act on the amount credited without including such GST. It has been further provided that in case the tax is deducted on a payment basis ‘as the payment is earlier than the credit, the tax is to be deducted on the whole amount as it is not possible to identify that payment with GST component of the amount to be invoiced in future. Further, adjustment of tax deducted in case of purchase return has also been provided.

It has been represented that in case of goods which are not within the purview of GST, such as petroleum products, various levies like VAT, Excise duty, sales tax etc. are charged. While the treatment of GST component has been clarified in circular no. 13 of 2021, the same is silent on other non-GST levies whi ch have otherwise been subsumed and replaced by GST.

In this regard, it is hereby clarified that in case of purchase of goods which are not covered within the purview of GST, when tax is deducted at the time of credit of amount in the account of seller and in terms of the agreement or contract between the buyer and the seller, the component of VAT/Sales tax/Excise duty/CST, as the case may be, has been indicated separately in the invoice, then the tax is to be deducted under section 194Q of the Act on the amount credited without including such VAT/Excise duty/Sales tax/CST, as the case may be. However, if the tax is deducted on a payment basis, if it is earlier than the credit, the tax is to be deducted on the whole amount as it will not be possible to identify the payment with VAT/Excise duty/Sales tax/CST component to be invoiced in the future. Furthermore, in case of purchase returns, the clarification as provided in Para 4.3.3 of circular no. 13 of 2021 shall also apply to purchase returns relating to non-GST products liable to VAT/excise duty/sales tax/ CST etc.

Complete Circular can be downloaded from below link: