As per the new provisions, the e-commerce operators are required to withhold taxes for facilitating sales of goods and services of e-commerce participants through its marketplace.
These provisions are different from Tax Collection at Source provision under GST laws.
Provisions of Section 194-O of the Act
As per the provisions of section 194-O, the e-commerce operators are required to withhold taxes @ 1% from 1-April-2021 on payment made to e-commerce participants on gross amount of sales of goods or provision of services facilitated by it through its digital or electronic facility at the time of credit or payment thereof to such e-commerce participant, whichever is earlier.
Further, withholding of taxes is also applicable in cases where any payment is made directly by a purchase to an e-commerce participant/seller for the sale facilitated by e-commerce operator. Such amount is included in the gross amount of such sale or services for the purpose of deducting taxes.
Deductor / E-Commerce Operator
An e-commerce operator has been defined widely to mean a person who owns, operates, or manages a digital/electronic facility for the sale of goods and services and is responsible for making payments to the e-commerce participant on such sales.
Deductee/E-Commerce Participant
An e-commerce participant has been defined to mean a person resident in India who sells goods, services or both through an electronic facility provided by an e-commerce operator.
Rate of TDS
The rate of TDS is 1% (from 1-april-2021) of the gross amount of sale of goods or provision of services facilitated by the e-commerce operator if the deductee (i.e seller) provides the PAN or Aadhaar.
A higher rate of 5% will be applicable if the PAN or Aadhaar is not provided by the seller or where the PAN is invalid/inoperative.
Time of deduction
The TDS shall be withheld at:
The time of credit of the amount to the account of an e-commerce participant/seller OR
The time of payment to such e-commerce participant/seller whichever is earlier.
TDS under section 194-O not to be applicable in certain cases:
TDS under section 194-O shall not be withheld by the e-commerce operators if all of the following conditions are satisfied by the seller:
The gross amount of sales or services or both of individual or HUF, through e-commerce operator, during the previous year does not exceed 5 lakh rupees, and
The seller has furnished his Permanent Account Number(PAN) or Aadhaar number of the e-commerce operator and is active.
TDS Claiming from seller Perspective
Sellers can claim the credit of the taxes withheld by the e-commerce operator by filing the return of income for the respective financial year within the due dates specified for filing the return of income.
FAQ on TDS 194-O
What does TDS on e-commerce transactions means?
An e-commerce operator will be required to withhold and deposit to the Government 1% of the gross sales of products/services by sellers on his marketplace. This withholding is not applicable for offline sales by sellers.
What is the TDS %?
The proposed TDS % on the gross sales of products/services is 1% (From 1-april-2021). Where no PAN or Aadhaar is provided by the seller or where the PAN is inoperative, the rate increases to 5%.
Are any online sellers excluded from the TDS?
There is an exclusion for individuals and hindu undivided sellers (HUFs) where the gross sales of the product or service during the
financial year is less than INR 5,00,000 and PAN or Aadhaar is provided. Further, only Indian resident sellers are covered in the TDS rules.
What is the effective date of the TDS provisions?
The rules are proposed to apply from 1 October 2020.
Whether the TDS will apply on a net sales i.e after considering returns?
The current rules propose that TDS will apply on the gross amount of sales from goods or services. If we receive clarification on this point, we will update this response.
What proof of TDS deduction will provided to the seller?
we understand that the provisions will be enabled for the e-commerce operator to issue a TDS certificate to the seller on a quarterly basis.
How can the seller claim credit or refund for the TDS deducted?
The seller can claim credit or refund for the TDS deducted by filing an income tax return for that financial year, as per their applicable due dates. Sellers may consult their respective tax advisors for the same.
Calculate TDS amount for orders
Sellers will be able to view the TDS deduction in their Statement of Account with description “TDS-Section 194-O” along with the date for which TDS is deducted or order number for which TDS is deducted.
To calculate TDS deducted for any order, sellers need to consider the gross sales value of the order and apply corresponding TDS rates.
You can download TDS Certificate follow below steps
Seller can download the TDS certificate from the Traces website in PDF format and it should be digitally signed, entity should be Vedson Ecommerce Private Limited.
Please follow the below steps in order to download LDC from the TRACES website
Step 1: Log into the TRACES https://www.tdscpc.gov.in/app/login.xhtml
Step 2: Enter the login credentials ( You will have login credentials to the TDS website)
Step 3: Go to Downloads ? Click on Download 197,206C(9) certificate
Step 4: Select the financial year as 2020-21 and fill the PAN of Vedson Ecommerce Private Limited: AAHCV5317K
Step 5: Download/View Certificate