TMI BlogGuidelines under sub-section (4) of section 194-O of the Income-tax Act 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... a transaction facilitated by the e-commerce operator, shall be deemed to be the payment by the e-commerce operator to the seller and shall be included in the gross amount of sale of goods or provision of services or both for the purposes of tax deduction at source (herein after referred to as the 'deemed payment'). 2 . Sub-section (4) of section 194-O of the Act empowers the Board (with the approval of the Central Government), to issue guidelines for the purpose of removing difficulties. Earlier, guidelines on section 194-O of the Act were issued vide Circular no. 17 of 2020 dated 29th September, 2020 and Circular no. 20 of 2021 dated 25th November 2021 . Representations have been received by the Board for further clarifications. In exercise of the power contained under sub-section (4) of section 194-O of the Act, the Board, with the approval of the Central Government, hereby issues the following guidelines. 3. Guidelines 3.1 Who should deduct tax at source where there are multiple e-commerce operators (ECO) involved in a transaction? Section 194-O of the Act mandates that the tax is required to be deducted where the sale of goods or provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or the deemed payment thereof to such seller by any mode, whichever is earlier. Here, ECO-2 would file the requisite TDS return in Form 26Q and issue certificate to the seller under Form 16A . 3.2 E-commerce operators may be levying convenience fees or charging commission for each transaction and seller might levy logistics delivery fees for the transaction. Payments may also be made to the platform or network (e.g. ONDC) provider for facilitating the transaction. Would these form part of gross amount for the purposes of TDS under section 194-O of the Act? In e-commerce, it is common for an order to be shipped to the buyer from the seller. It is therefore common for the sellers to charge the buyer additionally for shipping in the form of logistics/delivery/shipping/packaging fees. Further, the buyer-side ECO and seller-side ECO may charge a commission to the seller to enable the online transaction, and the seller may choose to recoup all or part of that amount from the buyer. Example 1 : A Buyer purchases goods worth Rs 100 from Seller and opts for home delivery. The Seller charges the Buyer an additional Rs 5 as packing fees, Rs 10 as shipping fees, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m or network (e.g. ONDC) provider for facilitating the transaction. These would form part of gross amount for the purposes of TDS under section 194-O of the Act if they are included in the payment for the transaction. If these payments are being paid on a lump-sum basis and are not linked to a specific transaction, then these need not be included in the gross amount Example 2 Consider a case where the Seller's label-price for a product is Rs 85, the seller-side ECO's fee (for listing the Seller catalogue and facilitating the transaction) is Rs 10, and the Buyer-side ECO's fee (to provide an interface to enable the Buyer to discover the seller/product and to enable them to place an order) is Rs 5. The Seller charges the Buyer a total of Rs 100 (Rs 85 + Rs 10 + Rs 5) and issues an invoice for Rs 100 (gross amount), as shown in the diagram above. The TDS under section 194-O of the Act will be calculated on Rs 100 (gross invoice value) at the rate of 1%, and that the responsibility of withholding and depositing it would be on the seller ECO. The buyer ECO's fees (Rs 5) charged to seller-side ECO and seller ECO's fees (Rs 15) charged to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clarification as provided in Para 4.3.3 of circular no. 13 of 2021 shall also apply to purchase return relating to non GST products liable to VAT/excise duty/sales tax CST etc. Accordingly it is clarified that under section 194-O of the Act, when tax is deducted at the time of credit of amount in the account of seller and the component of GST/various state levies and taxes comprised in the amount payable to the seller is indicated separately, tax shall be deducted under section 194-O of the Act on the amount credited without including such GST/various state levies and taxes. However, if the tax is deducted on payment basis because the payment is earlier than the credit, the tax would be deducted on the whole amount as it is not possible to identify that payment with GST/various state levies and taxes component of the amount to be invoiced in future. 3.4 How will adjustment for purchase-returns take place? It has been clarified in para 4.3.3 of circular no. 13 of 2021 , with respect to purchase-returns under section 194-Q of the Act, tax must have already been deducted before the purchase-return. In that case, the tax deducted may be adjusted against the next ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
