E-commerce Transactions & TDS U/s 194-O

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E-commerce Transactions & TDS U/s 194-O

 

 

 

Introduction:

Section 194O has been introduced in the Union Budget 2020. According to Section 194O, an e-Commerce operator is required to deduct TDS for facilitating any sale of goods or providing services through an e-Commerce participant. TDS on e-commerce operators under section 194-O is applicable from 1 October 2020.

 

Section 194-O: TDS on Payment made to E-Commerce Participants.

  • Notwithstanding anything to the contrary contained in any of the provisions of Part B of this Chapter, where sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform (by whatever name called), such e-commerce operator shall, at the time of credit of amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier, deduct income-tax at the rate of one per cent of the gross amount of such sales or services or both.

Explanation.—For the purposes of this sub-section, any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant for the sale of goods or provision of services or both, facilitated by an e-commerce operator, shall be deemed to be the amount credited or paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount of such sale or services for the purpose of deduction of income-tax under this sub-section.

Crux of Sub-section(1):

  • The actual goods or sevices are belonging to the E-commerce participant.
  • E- Commerce operator is only providing the electronic facility or platform to the e-commerce participant to sell those goods or services to the third party.
  • E-commerce operator deduct TDS @ 1% on gross amount of sale or services or both at the time of credit or payment whichever is earlier.
  • Deductor = E-commerce operator

Deductee = E-commerce participant

  • If third party or purchaser or service receiver made payment directly to the E-commerce participant but the sale of goods or services or both done through electronic facility of E-commerce operator then it is deemed that such payment is done by E-commerce operator therefore TDS to be deducted.
  • No deduction under sub-section (1) shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of an e-commerce participant, being an individual or Hindu undivided family, where the gross amount of such sale or services or both during the previous year does not exceed five lakh rupees and such e-commerce participant has furnished his Permanent Account Number or Aadhaar number to the e-commerce operator.

Crux of Sub-section (2):

 

Gross amount of sale of goods or services or both E-Commerce participant Furnished PAN No. FurnsihedAadhar No. TDS Rate
>5,00,000 Individual/HUF Yes Yes/No 1%
>5,00,000 Individual/HUF No Yes/No 5% (Section 206AA)
>5,00,000 Other than Individual/HUF Yes Yes/No 1%
>5,00,000 Other than Individual/HUF No Yes/No 5% (Section 206AA)
Gross amount of sale of goods or services or both E-Commerce participant Furnished PAN Furnished Aadhar No. TDS Rate
≤5,00,000 Individual/HUF No Yes 0%
≤5,00,000 Individual/HUF Yes No 0%
≤5,00,000 Individual/HUF No No 5%

(Section 206AA)

≤5,00,000 Other than Individual/HUF Yes Yes/No 1%
≤5,00,000 Other than Individual/HUF No Yes/No 5%

(Section 206AA)

 

 

  • Notwithstanding anything contained in Part B of this Chapter, a transaction in respect of which tax has been deducted by the e-commerce operator under sub-section (1), or which is not liable to deduction under sub-section (2), shall not be liable to tax deduction at source under any other provision of this Chapter.

Provided that the provisions of this sub-section shall not apply to any amount or aggregate of amounts received or receivable by an e-commerce operator for hosting advertisements or providing any other services which are not in connection with the sale or services referred to in sub-section (1).

Crux of Sub-section (3):

 

If TDS deducted as per Sub-section (1) or not liable to deduction as per Sub-section (2) then no TDS should be deducted under any other provisions of the Act.

  • If any difficulty arises in giving effect to the provisions of this section, the Board may, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
  • Every guideline issued by the Board under sub-section (4) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the e-commerce operator.
  • For the purposes of this section, e-commerce operator shall be deemed to be the person responsible for paying to e-commerce participant.

For the purpose of this section:

  • “electronic commerce” means the supply of goods or services or both, including digital products, over digital or electronic network;
  • “e-commerce operator” means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce;
  • “e-commerce participant” means 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;
  • “services” includes “fees for technical services” and fees for “professional services”, as defined in the Explanation to section 194J

 

 

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