-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
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.
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.
|S. No||Date||In the books of E-commerce participants (ABC Ltd.)||In the books of E-commerce Operators (XYZ)|
|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|
|(Being sale to customer through XYZ)||(Being sale to customer)|
|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)|
|–||TDS Payable A/c Dr||10,000|
|–||To Bank A/c||10,000|
|–||(Being TDS u/s 194O deposited)|
|Bank A/c Dr||1,18,000||–|
|To Mr. A A/c||1,18,000||–|
|(Being amount received from Customer)||–|
|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)|
|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)|