With effect from 1 October 2020, two sections introduced by Finance Act, 2020 becomes operative:
- Section 194-O casting an obligation on the e-commerce operator to deduct income-tax at the rate of one percent of the gross amount of sale of goods or provision of services or both, facilitated through its digital or electronic facility or platform, with exemption in case of certain individuals or HUF fulfilling specified conditions, and
- Section 206(1H) obligating a seller receiving an amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakhs rupees to collect tax from the buyer a sum equal to 0.1 per cent of the sale consideration.
Representations were received regarding the practical difficulties in implementing the above sections, and therefore, the Central Board of Direct Taxes, in order to remove those practical difficulties, has vide circular no. 17 dated 29 September 2020 clarified the following:
- The provisions of section 194-O and section 206(1H) shall not be applicable in relation to transactions in securities and commodities which are traded through recognized stock exchange or cleared and settled by the recognized clearing corporation, including recognized stock exchanges.
- While facilitating services to an e-commerce operator in an e-commerce transactions, the payment gateways are not required to deduct TDS under section 194-O if the tax has been deducted by the e-commerce operator on the same transactions.
- The period while calculating the amount of threshold of INR 5 lakhs under section 194-O and INR 50 lakhs under section 206C(1H) shall be counted from 1 April 2020 to 31 March 2021.
- No adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under section 206(1H) since the collection is made with reference to the receipt of amount of sale consideration.
Read full text of the Circular No. 17/2020 dated 29 September 2020 on guidelines under section 194-O and section 206C(1H) of the Income-tax Act, 1961