Applicability of Section 194-O
Lakshmikumaran & Sridharan Attorneys is organizing a webinar on Applicability of Section 194-O (Clarifications issued in respect of TDS implications on E-commerce operator)
Date & Time
23
Jan 2024 | 3:00 PM
Section 194-O was inserted in the Income Tax Act, 1961 (‘IT Act’) vide Finance Act, 2020, mandating e-commerce operators to deduct tax at the rate of 1% on the gross amount of sale of goods/provision of services by an e-commerce participant through its platform. Such tax is required to be deducted at the time of credit of the amount of sale/services to the account of e-commerce participant or at the time of payment thereof to such e-commerce participant, whichever is earlier. Once the tax is deducted at source (‘TDS’) in respect of a transaction under Section 194-O, the same transaction will not be subject to TDS under any other provision of the IT Act.
The section further empowers the Central Board of Direct Taxes (‘CBDT’) to issue guidelines for removing difficulties. Earlier CBDT had issued guidelines vide Circular No. 17/2020 and Circular No. 20/2021. Said guidelines had clarified aspects such as applicability of the provision on transactions carried through certain specified exchanges, on payment gateways, on e-auction services carried out through electronic portal, etc.
Recently, CBDT, vide Circular No. 20/2023 dated 28 December 2023 has issued further guidelines to clarify the scope and applicability of Section 194-O. The circular inter alia clarifies following aspects:
- TDS implications if multiple e-commerce operators are involved in a transaction.
- Calculation of gross amount for deduction of tax.
- Interplay between Sections 194-O, 194H and 194S of the IT Act.
- Treatment of GST and other state levies while calculating gross amount of sales.
- Adjustment for purchase returns on which TDS has been deducted.
- Treatment of discount given by seller and multiple e-commerce operators.
While the circular provides much needed clarity, its application in different business situations needs close evaluation. Also, whether the circular will have prospective or retrospective applicability is another critical aspect which requires examination.
Speakers:
- Mr. S. Vasudevan, Executive Partner, LKS
- Mr. Karanjot Singh Khurana, Associate Partner, LKS
