Budget 2020- FAQs on Proposed TDS under Section 194O on E-commerce Operator (w.e.f. 01/04/2020)
1. Who is responsible to deduct TDS under section 194O?
Any person, being E-commerce operator facilitating sale of good or provision of services of an E-commerce Participant through its digital or electronic Facility or platform (by whatever name called).
2. Is there any definition for E-commerce, E-commerce Operator and E-commerce Participant?
Yes, Explanation to 194O have specifically defined below terms
a. Electronic Commerce means the supply of goods or services or both, including digital products over digital or electronic network.
b. E-commerce operator: means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce and is responsible for paying to e-commerce participant. (Its mandatory to fulfil both precondition which are conjunctive and not dis conjunctive i.e. person must own, operates or manage Digital/Electronic Facility or Platform.)
c. 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.
3. What is the point of deduction of TDS u/s 194O?
Tax should be deducted either 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.
4. At what rate TDS has to be deducted u/s 194-O?
TDS is to be deducted at 1% on the gross amount of sales or services or both. In Absence of Pan/Aadhaar, TDS is to be deducted @5% (Section 206AA have been amended accordingly). (It is pertinent to note that proposed section uses word “Gross amount of such Sales” which means e-commerce operator will require to deduct TDS on GST portion of sales and as well as on Commission and affiliation portion also which e-commerce operator himself will withheld)
5. Under what circumstances TDS u/s 194-O is not deductible?
No TDS is to be deducted, were e-commerce Participant is Individual or HUF and gross amount of such sale or services or both during the previous year does not exceed five lakh rupees AND e-commerce participant furnished Permanent Account Number or Aadhaar number to the e-commerce operator.
6. Whether the TDS is to be deducted for Non-Resident Selling good trough Ecommerce Portal u/s 194O?
E-commerce Participant is defined 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. And thus No TDS is required to be deducted when Participant is Non Resident.
7. Whether TDS is to be deducted if amount is directly collected by E-commerce Participant?
For all transaction which have been facilitated by E-commerce participant, TDS has to be deducted by E-commerce operator irrespective of mode of payment to E-commerce participant.
8. Whether Ecommerce Participant can apply for Lower deduction/No Deduction certificate u/s 197?
Yes, Consequent amendment have been made in Section 197. Ecommerce Participant can make application before TDS AO who has a jurisdiction over his/her/its case.
Article by CA Saurabh Anokhchand Jain (saurabhajain@ymail.com )
Co Authored by CA Ashok Vyas (Vyas.ashokca@gmail.com)
Author Bio
When 194-O is applicable then what about the TDS previously deducted U/s 194C , J on the portal Expenses.
The Section 194 o is totally against the basi concepts of Income tax applicability of a business man.
A business man’s business income has both fixed capital,working capital expenses and profit. But taxing 1 % on gross value is absurd, It is to be charged only on his profit from the ecommerce business which is megre one for the particular previous year. He has to pay 1% under GST ACT also.