TDS on Payment by E-Commerce Operator to Participants | Section 194-O
- Blog|Income Tax|
- 4 Min Read
- By Taxmann
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- Last Updated on 20 May, 2022
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Section 194-O has been inserted with effect from October 1, 2020. Provisions of this section are given below –
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Persons specified by the Central Government (these persons can withdraw cash without TDS under section 194N) |
TDS provisions of section 194N are not applicable only if these conditions are satisfied – |
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1. Cash Replenishment Agencies (CRA’s) and franchise agents of White Label Automated Teller Machine Operators (WLATMO’s) |
These persons maintain a separate bank account from which cash withdrawal is made only for the purposes of replenishing cash in ATM operated by such WLATMO’s and the WLATMO have furnished a monthly certificate to the bank certifying that cash withdrawal has been reconciled with the amount of cash deposited in the ATMs. |
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2. The commission agent/trader, operating under Agriculture Produce Market Committee (APMC) and registered under any law relating to APM of the concerned State |
If these persons have certified to the banking company/co-operative society/post office that cash withdrawal (in excess of Rs. 1 crore in the previous year) is for the purpose of making payments to the farmers on account of purchase of agriculture produce. |
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3. An authorised foreign exchange dealer (and its franchise agent/ sub-agent). |
If cash withdrawal is made only for the purpose of purchase of foreign currency from foreign tourists or non-residents visiting India or from resident Indians on their return to India, in cash as per the RBI directions or guidelines. Moreover, these persons are not subject to TDS provisions of section 194N if cash withdrawal is made by these persons for the purpose of disbursement of inward remittances to the recipient benefi- ciaries in India in cash under Money Transfer Service Scheme (MTSS) of RBI. |
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- Who is responsible for tax deduction at source – Where sale of goods/services of an e-commerce participants is facilitated by an e-commerce operator through its digital or electronic facility or platform (by whatever name called), such e-commerce operator is required to deduct tax at source under section 194-O. For this purpose, “e-commerce operator” means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce. “e-Commerce participant” means a person resident in India selling goods/services (including digital products) through digital or electronic facility or platform for electronic commerce. “Services”, for this purpose, include fees for technical services/professional services. For the purpose of this section, e-commerce operator shall be deemed to be the person responsible for paying to e-commerce participant.
- Time of tax deduction at source – Tax is deductible by e-commerce operator at the time of credit of amount of sale of goods/services to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier.
- Rate of TDS – Tax is deductible at the rate of 1 per cent (0.75 per cent up to March 31, 2021) of the gross amount of such sale of goods/services. For this purpose, any payment made by a purchaser of goods/services directly to an e-commerce participant for the sale of goods/services, facilitated by an e-commerce operator, shall be deemed to be the amount credited/paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount of such sale or services for the purpose of tax deduction.
If the recipient does not have PAN, tax is deductible (by virtue of section 206AA) at the rate of 5 per cent. - When tax is not deductible – Tax is not deductible under section 194-O if the following conditions are satisfied –
a. e-commerce participant is an individual or HUF;
b. gross amount of such sale of goods/services through e-commerce operator during the previous year does not exceed Rs. 5 lakh; and
c. such e-commerce participant has furnished his PAN or Aadhaar number to the e-commerce operator.
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- TDS under any other section – Not possible – If tax is deductible under section 194-O (or not deductible because of threshold limit of Rs. 5 lakh given above), tax cannot be deducted under any other provisions of the Act. However, this rule is not applicable in the case of amount received/receivable by an e-commerce operator for hosting advertisements or providing any other services which are not in connection with the sale of goods/services given above.
- Lower TDS certificate – Lower/nil TDS certificate can be obtained by e-commerce participants by submitting Form No. 13 within the parameters of section 197 [see para 426.2].
- Removing difficulty – If any difficulty arises in giving effect to the provisions of this section, the Board may, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty. These guidelines shall be laid before each House of Parliament and shall be binding on the income-tax authorities and on the e-commerce operator.
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Sir, Explanation to sub-Section (1) of Section 194-O, says that Any Payment made by a purchaser of goods directly to an e-commerce participant for the sale of goods or provision of services or both, shall be deemed to be the amount credited or paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount of such sale or services for the purpose of deduction of income-tax under this sub-section.
So, do we still need to follow the clarification issued in 2017 regarding exclusion of GST from Amount, if something is explicitly stated in section itself.