Vide the Finance Act, 2020, the government has inserted provisions to cover e-commerce transactions under the scope of TDS. The purpose behind inserting these provisions is to enlarge tax bade by bringing e-commerce participants in the tax net. This newly inserted provision requires the e-commerce operator to deduct TDS from payments made to e-commerce participant effective from 1st October 2020. The detailed provision is summarised as under:
Applicability: If sale of goods/ services of an e-commerce participant are facilitated by an e-commerce operator through its digital or electronic facility or platform, then such an e-commerce operator is required to deduct TDS on payments made to the e-commerce participant.
Time of deduction: Earlier of -
i. at the time of credit of amount to account of an e-commerce operator; or
ii. at the time of payment;
Rate of TDS:
- Tax is deductible at the rate of 1% (0.75% up to 31 March 2021) of the gross amount of such sale of goods/ services;
- In case of Non-Pan cases, tax is deductible at the rate of 5%;
Exclusions:
- E-commerce participant is an individual or HUF; and
- Gross amount of sale of goods/ services through e-commerce operator during the previous year does not exceed INR 5 Lakhs; and
Important Point:
- TDS is required to be deducted excluding GST component.
- The provisions apply to both resident and non-resident e-commerce operator.
- The provisions apply only to resident e-commerce participant.
Further, whether TDS is applicable on delivery charges, whether the sales returned by the purchaser are deductible, how payment through payment gateways shall be seen, still remains a question and clarification from CBDT would put the issue to rest.
