Clarifications on TDS Provisions for e-Commerce Operators

Introduction:

There have been certain ambiguities in the minds of the taxpayer, related to the new TDS provisions inserted under Section 194-O vide Finance Act, 2020, wherein e-commerce operator has to deduct 1% TDS on gross amount of such sales or services or both received from e-commerce participants.

CBDT vide Circular No. 17 of 2020 dated 29.09.2020 has issued clarifications in order to remove such difficulties and ensure well-ordered implementation. The major highlights of the circular are as follows:

Clarification in respect of applicability of TDS Provisions on certain transactions

CBDT has clarified that the TDS provisions for e-commerce operators shall not apply to transactions related to securities and commodities traded through recognized stock exchanges

Clarification in respect of applicability on payment Gateway

CBDT has clarified that the TDS provisions for e-commerce operators shall not apply twofold i.e. payment gateway shall not deduct TDS if the e-commerce operator (facilitating the sale of goods or services) has already deducted the TDS of e-commerce participants under the newly inserted section of 194-O on the same transaction, provided an undertaking has been taken in this regard by such payment gateway.

Clarification in respect of applicability of TDS on insurance agent or insurance aggregator

CBDT has clarified that the:

• Insurance agent or insurance aggregator shall not deduct TDS under 194-O after the first year if they have no connection in the transactions done between insurance company and the buyer.
• Insurance company shall deduct TDS under 194 D as insurance commission, only if it pays commission to insurance agent or insurance aggregator in subsequent year.

Clarification in respect of calculation of thresholds for applicability of TDS provisions for FY 2020-21

The relaxation threshold limit of Rs. 5 lakhs for individual and HUF e-commerce participants shall be calculated from 01.04.2020 for the purpose of TDS applicability but TDS shall be deducted only on the amount credited or paid after 01.10.2020.

Source:  CBDT Circular No. 17/ 2020

– Ayush Ranjan Singh

Direct Tax Associate

SW India