Income Tax News: Section 194-O of the Income Tax (I-T) Act mandates that e-commerce operators deduct income tax at the rate of one percent of the gross amount of sales of goods or services, or both, according to a provision in the Finance Act, 2020. On December 28, the Central Board of Direct Taxes (CBDT) published a circular to allay some concerns regarding how this clause should be applied.
CBDT Circular Specifies Moment for TDS Deduction
According to the circular, the deduction should be done at the moment that the sale or service amount is credited to the participant’s e-commerce account. But when there are multiple e-commerce operators (ECO), confusion sets in. Additionally, there might be a network or platform like Open Network for Digital Commerce (ONDC) where several operators are taking part in the same transaction.
Understanding the Inclusion of Commissions and Convenience Fees in TDS Calculation
One may wonder if commissions and convenience fees collected by e-commerce operators, as well as payments made to networks like the ONDC, are included in the gross amount when computing one percent transaction-duty deduction (TDS). As is well known, taxes are subtracted from the gross proceeds from these sales of products and services.
CBDT Clarifies TDS Deduction from Total Gross Sales in E-Commerce
The circular makes it clear that the seller-side e-commerce operator will deduct the TDS from the total gross sales of the goods, including convenience, shipping, and packing fees. Furthermore, if payments have been made to the platform or network provider (like ONDC) in order to facilitate the transaction, these would be included in the transaction payment under Section 194-O and would be considered part of the gross amount for TDS purposes.
CBDT Exempts Lump Sum Payments from 1% TDS Gross Calculation
On the other hand, they do not have to be included in the gross amount for calculating the 1% tax deducted at source if they are being paid in one lump sum and are not associated with a particular transaction.
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