On Tuesday, the Income Tax Department has issued guidelines for applicability of TDS on Payment by e-commerce operator, under section 194-O which requires an e-commerce operator to deduct 1 per cent tax on the sale of goods and services with effect from October 1, 2020.

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The Finance Act, 2020 inserted a new section 194-O in the Income-tax (I-T) Act 1961 which mandates that with effect from October 1, 2020, an e-commerce operator shall deduct income tax at the rate of 1 per cent of the gross amount of sale of goods or provision of service or both, facilitated through its digital or electronic facility or platform.

And the guidelines issued by the Boards deal with the applicability of transactions carried through various exchanges, applicability on the payment gateway, applicability on an insurance agent or insurance aggregators, calculation of threshold for Financial Year 2020-21, applicability to the sale of a motor vehicle, adjustment for sale return, discount or indirect taxes, and fuel supplied to non-resident airlines.

Also, CBDT has said, “Sub-section (4) of section 194-O and sub-section (1-1) of section 206C of the Act empowers the Board (with the approval of the Central Government) to issue guidelines for the purpose of removing difficulties. Various representations have been received by the Board for issuing guidelines for removing certain difficulties. In exercise of power contained under sub-section (4) of section 194-0 of the Act and sub-section (1-1) of section 206C of the Act, the Board, with the approval of the Central Government, hereby issues the following guidelines.”

The Finance Act, 2020, also inserted sub-section (1 H) in section 206C in the I-T Act which mandates that with effect from October 1, 2020, a seller will collect 0.1 per cent tax as a part of income tax from the buyer if the sale consideration exceeds Rs.50 lakh or if aggregate sale value exceeded Rs.50 lakh in any previous year. The collection is required to be made at the time of receipt of the amount of sales consideration.

The CBDT further said that the new introduced TCS provisions would not apply to transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by recognized clearing corporation, including recognised stock exchanges or recognized clearing corporation located in International Financial Service Centre.

And the TCS and TDS provisions would also not apply to transactions in electricity, renewable energy certificates and energy-saving certificates traded through power exchanges.

With Warm Regards,

CL Bureau.

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