TDS ON PAYMENT OF CERTAIN SUMS BY E-COMMERCE OPERATOR TO E-COMMERCE PARTICIPANT
SUMMARY (SECTION 194-O)
Inserted from: 01-10-2020
| S. No | Basis | Description |
| (i) | Nature | Section 194-O Overrides provisions of Section 192 to Section 206AA of the Act. (i.e., No Deduction Under any other section) |
| (ii) | Deductor | E-Commerce Operator shall be deemed to be person responsible for deduct tax. |
| (iii) | Time of Deduction | (a) At time of Credit of Amount of Sale/Services to E-commerce participant (Resident)
OR (b) At time of payment Whichever is Earlier |
| (iv) | Rate of Tax Deduction
(If PAN Number furnished by deductee)
|
1 % of Gross Amount of sales/services
Note: No surcharge or cess will be added in above rate of 1 %, since payment is made to resident. |
| (v) | Rate of Tax Deduction
(If NO PAN Number furnished by deductee) |
(a) Rate prescribed in the act
(b) Rate mentioned in finance Act (c) At rate of 5 % (See note below) Whichever is Higher. Note: Finance Act, 2020 has inserted a proviso to section 206AA(1) from 01-04-2020 so as to provide the where tax was required to be deducted u/s 194-O and deductee fails to furnish PAN, Then rate of TDS shall not exceed 5% (Normally it is 20%) |
| (vi) | Amount on which tax is required to be deducted | Amount of sale/services (+) Any Direct Payment made by Purchaser of Goods or Recipient of services. |
| (vii) | Threshold Limit Available Only in case of e-commerce participant is Individual/HUF |
|
Definition – E Commerce Operator:
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.]
Clarifications:
- Applicability on transactions carried through Various Exchanges:
It is provided that the Provisions of section 194-0 and Section 206C(1H), of the Act shall not be applicable in relation to,-
(i) transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service. Centre;
(ii) transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC; and
For this purpose, (i) “recognized clearing corporation” shall have the meaning assigned to it in clause (i) of the Explanation to clause (23EE) of section 10 of the Act;
(ii) “recognized stock exchange” shall have the meaning assigned to it in clause (ii) of the Explanation 1 to sub-section (5) of section 43 of the Act; and
(iii) “International Financial Services Centre” shall have the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005
- Applicability on Payment Gateway:
It is provided that the payment gateway will not be required to deduct tax under section 194-0 of the Act on a transaction, if the tax has been deducted by the e-commerce operator under section 194-0 of the Act, on the same transaction. Hence, in the above example, if “XYZ” has deducted tax under section 194-0 on one lakh rupees, “ABC” will not be required to deduct tax under section 194-0 of the Act on the same transaction. To facilitate proper implementation, “ABC” may take an undertaking from “XYZ” regarding deduction of tax.
- Applicability of on Insurance Agent/Insurance Aggregators:
In years subsequent to the first year, if the insurance agent or insurance aggregator has no involvement in transactions between insurance company and the buyer of insurance policy, he would not be liable to deduct tax under section 194-0 of the Act for those subsequent years. However, the insurance company shall be required to deduct tax on commission payment, if any, made to the insurance agent or insurance aggregator for those subsequent years under the relevant provision of the Act.
Let us understand Section 194-O with some examples:
| S. No | Illustration | Solution |
| (i) | XYZ Pvt. Ltd. an E-commerce operator pays Rs.4,50,000 to Mr. B (Resident and furnished PAN) towards sale of goods through XYZ Pvt. Ltd. | No, TDS shall be deducted since threshold applicable to individual up-to Rs.5,00,000. |
| (ii) | Suppose in Above Case, If Mr. B not furnished his PAN Number to XYZ Pvt. Ltd. | TDS will be deducted @5% and No threshold will apply, If not furnished PAN Number. |
| (iii) | XYZ Pvt. Ltd. an E-commerce operator pays Rs.12,50,000 to Mr. B (Resident and furnished PAN) towards sale of goods through XYZ Pvt. Ltd | TDS is to be deducted @1 % on entire amount Rs.12,00,000 since amount Exceeds Rs. 5,00,000. |
| (iv) | XYZ Pvt. Ltd. an E-commerce operator pays as following:
(a) Rs. 4,00,000 on 25/04/2022 (b) Rs. 50,000 on 26/06/2022 (c) Rs.1,50,000 on 30/06/2022 Total = Rs.6,00,000 to Mr. B (Resident and furnished PAN) towards sale of goods through XYZ Pvt. Ltd |
(a) No, TDS Amount up-to 5,00,000 (If Individual/HUF) and furnished PAN
(b) No, TDS Amount up-to 5,00,000 (If Individual/HUF) and furnished PAN (c) TDS is Deducted @1% on Entire Rs.6,00,000. Since Aggregate Amount paid Exceeds Rs. 5,00,000 |
| (v) | XYZ Pvt. Ltd. an E-commerce operator pays Rs.1,50,000 to Mr. B (Non-Resident) towards supply of services through its platform. | Tax is to be deducted under section 195 at applicable rates on Income chargeable to tax. |
| (vi) | XYZ Pvt. Ltd. an E-commerce operator pays Rs.3,50,000 to ABC Pvt. Ltd. (Domestic Company) towards sale of goods through its platform | TDS is deducted @ 1 % on Entire 3,50,000 since payee is other than Individual/HUF, no threshold shall be available. |
Author Bio
Ask one question _ I m participant of Amazon. I m liable to dudect TDS on Amazon Services invoices ( FBA shiping & Commission invoice) ? please explain.