Applicability of Section 194-O-TDS on payments made to e-commerce participants by e-commerce operators
-Section 194-O shall be applicable on R & NR (Resident & Non-Resident) E-commerce operators making payment to resident e-commerce participants in relation to sale of goods or services facilitated through its digital or electronic facility or platform.
-Applicable for the transactions from 1st October’2020 onward.
Law: E-commerce operators* should deduct @1% TDS on the gross amount of sales of goods** or services** facilitated by e-commerce operators through digital or electronic platform to the participants. The TDS rate of 1% would apply either at the time of credit to the e-commerce participants or payment by any mode or where purchaser of goods or services making payment directly to e-commerce participants.
* E commerce operators like Flipkart, Amazon, Facebook, Myntra etc.
**Goods and services includes digital products (E-book, podcasting, blogs, audio video etc)
Exceptions: TDS under section 194-O not to be deducted in case of
- An individual or HUF only, where the aggregate gross sale of goods or services or both is not likely to exceed INR 5 Lakhs during the FY; and such person has furnished PAN or an aadhar to the e-commerce operator.
- Any payment which are covered under this section shall not be liable to TDS under any other provision of the Act.
Points to Remember related to TDS under Section 194O:-
1. Section 197 now provides that lower withholding certificate (Form -13) may be obtained for Tax deduction under section 194O from the Tax Authorities.
2. Section 206AA now provides that if PAN/Aadhaar is not available, then Tax would be deducted at the rate 5% instead of 1% as prescribed in Section 194O.
Illustration:-
ABC Ltd. (E-Commerce participant) is selling its product through XYZ (E-Commerce Operator). Mr A buys this product online from ABC Ltd. for Rs. 1,18,000/- (Including GST of Rs. 18,000/-) on 1st Oct’2020.
XYZ credits the account of ABC Ltd. on 1 October 2020, but the customer makes the payment directly to ABC Ltd. on 15 October 2020.
Here, XYZ is required to deduct TDS @1% on Rs 1,00,000/- (Excluding GST) at the time of credit to the party or making payment, whichever is earlier. In this case, TDS should be deducted on 1 October 2020.
Accounting Entries
| S. No | Date | In the books of E-commerce participants (ABC Ltd.) | In the books of E-commerce Operators (XYZ) | ||
1. | 1st Oct’2020 | XYZ A/c Dr | 1,18,000 | Mr. A A/c Dr | 1,18,000 |
| To Sales | 1,00,000 | To ABC Ltd | 1,18,000 | ||
| To GST | 18,000 | ||||
| (Being sale to customer through XYZ) | (Being sale to customer) | ||||
| 2. | 1st Oct’2020 | TDS Receivable A/c Dr | 10,000 | ABC Ltd. A/c Dr | 10,000 |
| To XYZ A/c | 10,000 | To TDS Payable A/c | 10,000 | ||
| (Being TDS recoverable from Operator) | (Being TDS u/s 194O deducted) | ||||
| 3. | 1st Oct’2020 | – | TDS Payable A/c Dr | 10,000 | |
| – | To Bank A/c | 10,000 | |||
| – | (Being TDS u/s 194O deposited) | ||||
| | |||||
| 4. | 15th Oct’2020 | Bank A/c Dr | 1,18,000 | – | |
| To Mr. A A/c | 1,18,000 | – | |||
| (Being amount received from Customer) | – | ||||
| 5. | 15th Oct’2020 | Mr. A A/c Dr | 1,18,000 | ABC Ltd. A/c Dr | 1,18,000 |
| To XYZ A/c | 1,18,000 | To Mr. A A/c | 1,18,000 | ||
| (Being adjustment entries passed) | (Being adjustment entries passed) | ||||
6. | 15th Oct’2020 | XYZ A/c Dr | 10,000 | Bank A/c Dr | 10,000 |
| To Bank A/c | 10,000 | To ABC Ltd. | 10,000 | ||
| (Being TDS payment made to operator) | (Being TDS amount received from participants) | ||||
Author Bio
Is Section 194O applicable for tender called by govt thru Neml Spot exchange.
selling products thru Amazon, can we debit the tds amount deducted by Amazon under TDS-194-O in our books of account and can we remit the same.