Section 194-O which deals with TDS by E-commerce operator on payment made to E-commerce participant was inserted by Finance Bill, 2020 and is applicable from 01.10.2020.
TDS under this section shall be deducted at 1% of the gross amount of sale value of goods or services or both.
TDS shall be deducted at the time of credit of amount of sale or services or both 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.
In case the E-commerce participant (i.e. person selling on E-commerce platform) is an individual/ HUF, TDS shall be deducted only if gross amount of such sale or services or both during the previous year exceed five lakh rupees and such e-commerce participant has furnished his Permanent Account Number or Aadhaar number to the e-commerce operator.
With regard to above section, any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant for the sale of goods or provision of services or both, facilitated by an e-commerce operator, 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.
“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 or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce;
Thus, there needs to be a clarification that TDS shall not be deducted on GST component in the amount received by e-commerce operator. Also no TDS shall be deducted if the E-commerce participant is a non-resident.
The above provision was added in the Income tax act with the following motive as mentioned in memorandum: “In order to widen and deepen the tax net by bringing participants of e-commerce within tax net, it is proposed to insert a new section 194-O in the Act.”
However, it is important to mention here that E-commerce participant were already covered in the tax net under GST where TCS at 1% is required under to be collected and now again this 1% would be deducted under Income tax and hence 2% amount would be with held with government.
Thus, this is just a way of government to collect tax in advance rather than bringing it in tax net.
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