Section 194O-TDS on E-commerce transactions

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Section 194O-TDS on E-commerce transactions

Section 194O:

In order to widen and deepen the tax net by bringing participants of e-commerce within tax net, it is proposed to insert a new section 194-O in the Act so as to provide for a new levy of TDS at the rate of 1% with the following key points:
  •  The TDS is to be paid by e-commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform; 
  •  E-commerce operator is required to deduct tax at the time of credit of amount of sale or service or both to the account of e-commerce participant or at the time of payment thereof to such participant by any mode, whichever is earlier. 
  •  The tax at 1% is required to be deducted on the gross amount of such sales or service or both. 
  • Any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant shall be deemed to be amount credited or paid by the e-commerce operator to the  e-commerce participant and shall be included in the gross amount of such sales or services for the purpose of deduction of income-tax.

It means payment made by buyer directly to the seller of goods or service provider will be deemed to be payment made by e-commerce operator to seller of goods for TDS purpose.

  • The sum credited or paid to an e-commerce participant (being an individual or HUF) by the e-commerce operator shall not be subjected to provision of this section, if the gross amount of sales or services or both of such individual or HUF, through e-commerce operator, during the previous year does not exceed Rs.5 Lakhs and such  e-commerce participant has furnished his Permanent Account Number (PAN) or Aadhaar number to the  e-commerce operator.
  • A transaction in respect of which tax has been deducted by the e-commerce operator under this section or which is not liable to deduction under the exemption discussed in the previous bullet, there shall not be further liability on that transaction for TDS under any other provision of Chapter XVII-B of the Act. This is to provide clarity so that same transaction is not subjected to TDS more than once. However, it has been clarified that this exemption will not apply to any amount received or receivable by an e-commerce operator for hosting advertisements or providing any other services which are not in connection with the sale of goods or services referred to in sub-section (1) of the proposed section.
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It means above exemption will not apply if e-commerce operator provides advertisement services or any other services which are not in connection with sale of goods or provision of services. 

  • “e-commerce operator” is defined to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce and is a person responsible for paying to e-commerce participant.

For eg.Amazon,Flipkart,Myntra,etc.

  • “e-commerce participant” is defined to mean a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce.
  • “electronic commerce” is defined to mean the supply of goods or services or both, including digital products, over digital or electronic network.
  • “services” is defined to include fees for technical services and fees for professional services, as defined in section 194J.
  • Consequential amendments are being proposed in section 197 (for lower TDS), in section 204 (to define person responsible for paying any sum) and in section 206AA (to provide for tax deduction at 5 per cent. in  non-PAN/ Aadhaar cases). 
This amendment will take effect from 1st April, 2020. 
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