INTRODUCTION:
- The relevance of introducing Section 194 O of the Income tax Act 1961 is that in today’s era there are many un-registered sellers who are selling their commodities and providing many other services through e- commerce platforms and backing large amount of funds.
- But on such income none of them are paying tax to the Indian government. Likewise they are using this loophole to evade paying tax to the government.
- In order to curb these practices TDS on e-commerce transaction has been levied by the income tax department through introducing section 194 0 under The Finance Act 2020.
Manner of application :
E-commerce operators who are facilitating the sale of goods/services through e-commerce platform are required to deduct TDS @ 1% on gross sale amount for the payment made to e-commerce participant.
Interpretation of Key Terms:
Deductor : E-commerce Operator (owns, operates or manages an electronic/digital facility. It facilitates the sale of goods and services on his platform. This operator solely manages the payment to the e-commerce sellers.)
Example: Amazon, Flipkart etc.
Deductee: E-commerce participant (Those who sell their goods or provide services through e-commerce platform)
Gross Sale Amount: Sale price received by the e–commerce participant upon sale of goods / services to the end users.
Time of deduction: At the time of making payment or crediting the account of e-commerce participant whichever is earlier.
Rate of TDS : Generally 1 %, but upon non submission of PAN rate would be 5 %
Exception:
Section 194 0 is not applicable upon satisfaction of all the following conditions:
- The e- commerce participant is an Individual/ HUF
- The gross amount of such sale or services or both during the PY up to Rs 5 lakh
- The e-commerce participant furnished PAN or Aadhar
Some important clarifications:
- When payment for goods/services is made by the end users to e-commerce participant directly then also this section would be attracted and such proceeds are included in gross sale amount .Accordingly TDS is to be deducted by the e-commerce operator, provided the sale is facilitated by the e-commerce operator.
- When TDS is already deducted under this section then TDS under any other section is not attracted.
Example: Sai Ltd an e –commerce participant sold watches to end customers worth Rs 18 lakh (Gross sale amount) through amazon. Hence TDS u/s 194 O is required to be deducted by amazon @ 1%(18,00,000)=18,000Rs while crediting or the time of making payment to Sai Ltd whichever is earlier.
