All about Section 194O – TDS on E-commerce transactions

On 1^st February 2020, the FM has proposed the new section which shall be effective with effect from 1^st April 2020 relating to the TDS on account of E-commerce transactions. This step has been taken to widen the tax net for the transactions being taken on the E-commerce portals on account of sale of goods or provisions of services or both. The provisions of proposed section are as follows:-

• When to deduct the TDS

 The TDS shall be deducted on account of e-commerce transactions operated through the digital or electronic facility or platform maintained by the e-commerce operators by the e-commerce transactions on account of the sale of goods or services or both.

TDS shall be deducted at the time of credit of amount of sale or service or both to the account of e-commerce participant or at the time of payment thereof to such participant by any other mode, whichever is earlier.

The amount on which the TDS to be deducted shall be the taxable value exclusive of the GST (Author’s opinion).

• Rate of TDS

The TDS shall be deducted at the rate of 1 percent on the gross amount of sales or service or both.

• Persons eligible for Tax deduction

The e-commerce operators shall deduct the TDS of the following persons:-

1. Individual and HUF whose transactions are above Rs. 5 Lakhs during the previous FY and furnished PAN / AADHAR.
2. Company
3. Partnership firm
4. Limited Liability Partnership
5. Any other person other than the options above.

• Persons exempt from the provisions of section

The provisions of the section shall not apply on the Individual / HUF whose gross amount of sale of goods or provision of services through the e-commerce operator shall not exceed Rs. 5 Lakhs and has furnished the PAN / AADHAR to the e-commerce operator.

• Exclusivity of the Section

 Once the TDS has been deducted under this section on any of the transactions, then no TDS under any other sections as per the provisions of Chapter XVII-B shall be deducted on the same transaction.

• TDS rate in case of Non PAN / AADHAR

As per the provisions of Section 206AA, if the Individual / HUF do not furnish the PAN / AADHAR, then the TDS shall be deducted at the rate of 5 percent.