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TDS on Payment by E-Commerce Operator guidelines issued by CBDT

1) The Central Board of Direct Taxes (CBDT) has issued the guidelines for TDS on Payment by e-commerce operator, under section 194-O with effect from October 1, 2020.

2) The guidelines issued by the Boards deal with the applicability of transactions carried through various exchanges; applicability on 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 nonresident airlines.

“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 Circular said.

3) The Finance Act, 2020 has introduced a new Section 194-O for deducting 1% TDS on Payments made to E-Commerce Participants, which will be applicable for the transactions from 1st October 2020 onward. Briefly, if any person purchased any product or received any service through an E-Commerce Operator (ECO) from any Person then TDS should be deducted by ECO as per section 194-O.

4) Finance Act, 2020 also inserted sub-section (1H) in section 206C of the Act which mandates that with effect from 1 day of October 2020 a seller receiving an amount as consideration for the sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year to collect tax from the buyer a sum equal to 0.1 per cent of the sale consideration exceeding Rs.50 lakhs as income-tax. The collection is required to be made at the time of receipt of the amount of sales consideration.

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