TDS on ecommerce transactions? Here's what CBDT says

Source :Sify
Author :Finance Desk
Last Updated: Wed, Sep 30th, 2020, 02:06:21hrs
Tax evasion cartoon

New Delhi: If you are planning to make online transactions on e-commerce sites during the festive season you better be informed of a one percent TDS. Chances are that the payment gateway may deduct a 1 percent TDS.  

The new ruling will be effective from October 1 and will involve 1 percent TDS on the transactions charged as part of goods and services taxes. The CBDT circular noted that in e-commerce transactions, the payments are generally facilitated by payment gateways.

The CBDT was quick to also clarify that the payment gateway will not be required to deduct tax under section 194-0 of the Income-Tax Act on a transaction, if the tax has been deducted by the ecommerce operator under the section concerned of the Act, on the same transaction.

It is represented that in these transactions, there may be applicability of section 194-0 twice, once on e-commerce operator who is facilitating the sale of goods or provision of services or both and once on payment gateway who also happen to qualify as e-commerce operator for facilitating service.

"In order to remove this difficulty, 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 ecommerce operator under section 194-0 of the Act, on the same transaction," it said.

Sharing an example of how the system would work, a CBDT circular added, "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."

The CBDT also said that the new introduced TCS provisions would not apply to transactions in securities and commodities which are traded through stock exchanges or cleared and settled by clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service Centre.

Also excluded are transactions in electricity, renewable energy certificates and energy saving certificates traded via power exchanges.