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E-comm platforms must deduct tax at source

Vivek Ananth Chennai | Updated on February 01, 2020 Published on February 01, 2020

To increase the revenue from businesses that operate on e-commerce platforms, the Centre has proposed to enact a new section — 194-O — in the Income Tax Act, 1961. When this amendment is passed, sellers of goods and services on e-commerce platforms will be impacted.

Who all are included?

This amendment does not impact our online purchases. The deduction of tax at source will come into play when a service provider or a seller gets payment from the e-commerce platform. The new amendment could include almost all e-commerce transactions that most of us undertake.

The person who owns and runs an e-commerce platform and is responsible to make payments to sellers or service providers on the platform is liable to deduct tax at source.

 

The tax shall be deducted either on payment or when the seller or service provider’s ledger is credited in the books of the platform owner. The e-commerce platform operator will be responsible to deduct tax at 1 per cent of gross amount of sale or services.

For example, if a seller on Amazon receives some money from Amazon for a sale of goods on Amazon.in, then tax must be deducted either on receipt of the money or on the day Amazon make a receivable entry against the seller’s name in its books. This requirement of TDS might be applicable for online cab hailing platforms like Ola and Uber, bus aggregators and services such as UrbanClap or Swiggy.

 

Exemptions

However, these platform companies will not be liable to deduct income tax at source if they are making payments to individuals or a Hindu Undivided Family (HUF).

The total receipts from sale of goods or services to such individuals or an HUF should not be more than ₹5 lakh to avail this exemption.

The said TDS under section 194-O of the Income tax Act, 1961, will supersede other TDS sections of the act. This exception is, however, not applicable for hosting advertisement services, or providing any other services that are not in connection with sale of goods or services through an e-commerce platform.

 

 

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Published on February 01, 2020
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