TDS @ 1% on Payments made to E Commerce Participants by E Commerce Operator u/s. 194-O w.e.f. 01.10.2020

The Finance Act, 2020 has introduced a new Section 194-O for deducting 1% TDS on Payments made to E-Commerce Participants, which will be applicable for the transactions from 1st October 2020 onward.

In brief, if any person purchased any product or received any service through an E-Commerce Operator (ECO) from any Person then TDS should be deducted by ECO as per section. 194-O. The detailed provision are as follows.

Section 194O TDS on Payment of certain sums by the e-commerce operator to e-commerce participant w.e.f 01.10.2020.

1. Tax to be deducted by ECO at the rate of 1% (as per sec. 206AA – 5% if PAN of the deductee is not available) of the value (Excluding GST) of goods or services of an ECP sold through an ECO using his website At the time of credit or payment (whichever is earlier) of the amount of sale to the account of an ECP by ECO. { Explanation to Sub Sec. 1 – any payment made by Buyer of goods or services directly to an ECP, shall be deemed to be the amount credited or paid by the ECO to the ECP and shall be included in the value of the sale of goods or services for the purpose of deduction of tax under this sub-section}

2. No TDS: where the ECP is Individual or HUF and the Amount paid/expected to be paid by ECO to ECP during the previous year does not exceed 5,00,000 rupees & ECP furnished PAN or Aadhar to ECO.

3. No TDS should be deducted under any other provisions If TDS is deducted under Sub Sec. 1 or No TDS  is required to be deducted as per Sub Sec. 2 

4. The Board (Tax Department) may, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty in giving effect to the provisions of this section

5. Such Guidelines shall be laid before each House of Parliament and shall be binding on the income-tax authorities and on the ECO.

Definitions :

 E-COMMERCE OPERATOR (ECO) 

a person who owns operates or manages digital or electronic facility or platform for electronic commerce;

E-COMMERCE PARTICIPANT (ECP)

a person resident in India selling goods or providing services or both, including digital products, through the digital or electronic facility or platform for electronic commerce;

Example :

Case-1: Mr Shankar purchased iPhone SE (2020) at the price of Re. 1,00,000 (+Re. 18,000 GST) through FLIPCART from APPLE Inc. on 01.10.2020 and made the payment on delivery date 07.10.2020 to FLIPCART . Now FLIPCART is required to deduct TDS @1% (Re. 1,000)/@5% (Re.5,000) if APPLE not furnished its PAN to Flipcart on 01.10.2020 as per sec. 194-O

Case-2: The amount is Directly paid by Mr Shankar to APPLE-In this case also FLIPCART should deduct TDS as above.

Case-3: APPLE Inc is a proprietorship firm whose proprietor is Mr Chandra Shekar who is an Individual / APPLE is a HUF and the Amount paid or expected to be paid by FLIPCART to Mr Chandra Shekar/His HUF is not exceeding Re. 5,00,000 – In this case, no TDS is required to be deducted.

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Company: ML TAXSOLUTIONS
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