New Guidelines Address Concerns Over India’s E-Commerce Tax Rule

The CBDT has released detailed guidelines clarifying issues regarding Section 194-O of the Income Tax Act mandating a 1% Tax Deduction at Source (TDS) by e-commerce companies.

What Does Section 194-O Require?

Introduced in 2020, Section 194-O requires e-commerce operators like Amazon or hotel booking platforms to deduct 1% TDS on payments to local seller-partners for facilitating product sales or service bookings on their websites and apps.

Who Does it Apply to?

It covers resident Indian individual sellers and enterprises, termed e-commerce participants, but exempts those below Rs 5 lakh in annual sales. Non-resident sellers are excluded.

Concerns Addressed

Stakeholders had raised several concerns regarding 194-O’s applicability, especially under open e-commerce network models like ONDC having multiple operators.

The circular offers extensive examples covering various scenarios and business models to resolve such difficulties.

It also incorporates Frequently Asked Questions (FAQs) to clarify additional issues like treatment of sales returns, accounting periods, and tax credits.

Key Takeaways

By comprehensively addressing representations from industry participants, the guidelines cement Section 194-O’s policy intent of bringing small e-sellers into the tax net by leveraging large e-commerce platforms.

They also adapt compliance requirements to new open e-commerce ecosystems with multiple operators splitting facilitator roles.

Month: Current Affairs - December, 2023

Category: Economy & Banking Current Affairs