TDS on E Commerce Transactions under Section 194O with effect from 01st October 2020
Are you planning to start selling your products or providing service on e-commerce platforms or Are you E commerce participant i.e. currently selling your products or providing services on e-commerce platforms?
If your answer is yes, then this article will be helpful for you in terms of newly inserted section 194-O which specifies the applicability of TDS on E commerce transactions, which will be applicable from 01st Apr 2020.
Before we move further towards the analysis of Section 194-O lets understand the need of insertion of new section. Now a day’s many companies are using e commerce to reach out to customers worldwide and increase their sales. As we all aware about the fact that now a days everyone prefer to purchase / sell the products over the digital platform because it require less cost in terms of setup or advertisement or less efforts in search of a buyer (from seller point of view) or many options are available at one platform or comparison of product is easy or we get the accessibility of product/ service on the mode of any time / from anywhere basis (from buyer point of view). So the number of ever increased user is increasing day by day. Now there was a problem with revenue that they were not able to identify the small seller of goods/services who were not filing their return of Income and transacting over the e commerce platforms. So revenue came up with the new idea and imposed the liability of Tax deduction of source on e-commerce operator i.e. on the mediator between the buyer and seller of goods or services ex. Amazon, myntra etc.
Now let’s move further towards analysis of newly inserted section 194-O step by step with the help of above mentioned points.
Let’s take an example to understand the above in broader way.
ABC, a partnership firm selling its product X at Amazon India. Amazon India has credited the account of ABC on 31st December 2020 for the sale of products X made during the month of December 2020 by sum of Rs. 5,70,300 and made payment for sum of Rs. 5,70,300 on 03rd Jan 2021. Further Mr. Ram, who purchase product X from Amazon India has made the payment of Sum of Rs. 25,200 directly to ABC on 15th Dec. 2020. Now the following will be impact of provisions of section 194-O.
The provision of this section will be applicable from 01st October 2020 on every person transacting over the e-commerce platform. Provision in respect of applicability states as under:
Nature of Payment
|Thres-hold Limit (Rs)||TDS Rate (%)
Upto 13th May, 2020
|TDS Rate (%)
From 14th May, 2020
|Resident||Non – Resident [*]
|Resident||Non – Resident [*]|
|Section 194O: Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform.
(In case the E-commerce participant does not furnish PAN or Aadhar Number to the e-commerce operator, TDS shall be deducted at the rate of 5% under section 206AA of the Act)
(This Section is inserted by Finance Act, 2020 which is applicable from 01/10/2020)
(w.e.f. 01st October, 2020)
(w.e.f. 01st October, 2020)
* The rate of TDS are after considering cess @4% and shall be increased by applicable surcharge.
Payment of certain sums by e-commerce operator to e-commerce participant.
194-O. (1) 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.
(2) 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.
(3) 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).
(4) 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.
(5) 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.
(6) For the purposes of this section, e-commerce operator shall be deemed to be the person responsible for paying to e-commerce participant.
Explanation.—For the purposes of this section,—
(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;
(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;
(d) “services” includes “fees for technical services” and fees for “professional services”, as defined in the Explanation to section 194J.]