Guidelines for Deduction of Tax by E-commerce Operators Under Section 194-O
TDS on E-commerce Operator
Finance Act, 2020 had inserted section 194-O in the Act Mandating that an E-commerce operator (ECO) shall deduct the Income tax @1% of the Gross total amount of sale of goods or provision of services or both.
The deduction should be made at the time of credit of amount of such sale or service or both to the account of an E-com participant or at the time of Payment, whichever is earlier.
TDS DEDUCTION IN CASE OF MULTIPLE OPERATORS INVOLVED IN TRANSACTION
Section 194-O mandates that the tax is required to be deducted where the sale of Goods or provision of services or both of an E-Commerce participant is facilitated by an E-commerce operator through its digital facility or platform.
However, in case of multiple E-commerce operators in single transaction the treatment will be as follow: -
Situation-1
• Where multiple operators are involved in single transaction and seller side ECO is not the actual seller of goods or services.
• On the buying side, a buyer side ECO could be providing an interface to buyer and on the selling side, a seller-side ECO could be providing an interface to seller.
• In this situation the Seller side Eco will deduct the tax u/s 194-O, who finally makes the payment to the seller for the goods sold and services provided.
Situation-2
• Where multiple operators are involved in single transaction and seller side ECO is the actual seller of goods or services. In this situation, the compliance u/s 194-O of the Act is to be done by the ECO which finally makes the payment.
• Here such ECO would file the requisite TDS return in Form 26Q and issue certificate to seller under Form 16A.
Convenience fees, delivery fees and commission will be included in the gross amount
• Payments made to the platform or network provider (such as ONDC) for facilitating the transaction would form part of the “gross amount” if they are included in the payment for the transaction.
• However, if these payments are being paid on a lump-sum basis and are not linked to a specific transaction, then these need not be included in the “gross amount”.
GST or various state levies and taxes
• Tax is deducted at the time of credit of the amount in the account of the seller and the component of GST or various state levies and taxes is indicated separately in the invoice – TDS on the amount credited without including such GST or tax component.
• The tax is to be deducted on a payment basis because the payment is made earlier than the credit, - TDS on gross amount.
Adjustment of Purchase Return
• Seller has refunded the money against the purchase return – TDS may be adjusted against the next purchase against the same seller in the same financial year.
• Purchase return is replaced by the goods - No adjustment in TDS
Treatment of Discounts
a. Seller side discount: In the situation where the discount is given by the seller itself, the seller will reduce the price of product sold or service provided. Hence Tax will be deducted on gross total less discount.
b. Buyer ECO or Seller Eco Discount: In case where the Buyer ECO or Seller ECO give discount, usually the seller receives full consideration for the product, however part of it received from the buyer and the balance is discharged to the seller by the buyer ECO/seller ECO as the case maybe. Hence the tax will be deducted on Gross total amount without adjusting discount.
For access FAQs on TDS Compliance u/s 194-O click on link below:
https://incometaxindia.gov.in/communications/circular/ciruclar-20-2023.pdf
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