CBDT via Circular No. 13/2021 dated 30th June 2021 has issued clarifications w.r.t. Sec. 194Q of Income Tax Act, 1961 which deals with TDS on purchase of goods.

Here are some of the key points of circular :
  1. TDS u/s 194Q will not be applicable on any sum credited or paid before 1st July 2021.
  2. TDS under section 194Q is to be charged on amount net of GST, if charged separately. However for section 206C(1H), GST is to be included.
  3. Transactions on recognised exchanges exempted from 194Q.
  4. Hierarchy of section 194-O, 194Q and Section 206C(1H) clarified. If section 194-O is applicable to a transaction then 194Q and 206C(1H) will not apply. If 194Q is applicable then section 206C(1H) shall not be applicable. If section 194-O and 194Q are not applicable section 206C(1H) will be applicable.
  5. Turnover/ Gross receipts of 10 crore of buyer for applicability of this section 194Q will mean Turnover/ Gross receipts in business only. Hence receipts by way of rent, interest , capital gain etc if not considered as business income are not to be included.
  6. Further provision of section 194Q not to apply in first year of an entity as no turnover / gross receipts in preceding year since entity was not in existence.
  7. 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.). In the same way, Sec. 206C(1H) will not be applicable on sale of goods to abovementioned persons.

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