TDS/TCS provisions applicable for e-commerce firms from 01st October that businesses must know

blog imageThe central government on Tuesday released a detailed list of tax deducted at source (TDS) or tax collected at source (TCS) provisions applicable from 1 October . The move came after the Central Board of Direct Taxes noticed “practical difficulties in implementing provisions of TDS and TCS”.

The Finance Bill 2020 has introduced a new provision to mandate Electronic Commerce Operators (ECOs) for deducting TDS in respect of the amount payable to the seller on any sale of goods and services. An ECO is liable to deduct TDS at 1%.

For e-commerce transactions:

Clarifying theTDS deductionon e-commerce transaction, the income tax department said, “The payment gateway will not be required to deduct tax under section 194-0 of the Act on a transaction, if the tax has been deducted by the e-commerce operator under section 194-0 of the Act, on the same transaction.”

For insurance aggregators:

“If the insurance agent or insurance aggregator has no involvement in transactions between insurance company and the buyer of insurance policy, he would not be liable to deduct tax under section 194-0 of the Act for those subsequent years,” the CBDT said in a statement. However, the insurance company shall be required to deduct tax on commission payment, if any, made to the insurance agent or insurance aggregator for those subsequent years under the relevant provision of the Act.

Calculation of threshold for the financial year 2020-21

1) “Since the threshold of5 lakh for an individual/ Hindu undivided family (being e-commerce participant who has furnished his PAN/Aadhaar) is with respect to the previous year, calculation of amount of sale or services or both for triggering deduction under section 194-0 of the Act shall be counted from 1 April, 2020,” the income tax regulator said.

Hence, if the gross amount of sale or services or both facilitated during the previous year 2020-21 (including the period up to 30 Sept 2020) in relation to such an individual or Hindu undivided family exceeds five lakh rupees, the provision of section 194-0 shall apply on any sum credited or paid on or after 1 October, 2020, it added.

2) As sub-section (1H) of section 206C of the Act applies on receipt of sale consideration, the provision of this sub-section shall not apply on any sale consideration received before 1 October 2020.

2) “Since the threshold of fifty lakh rupees is with respect to the previous year, calculation of receipt of sale consideration for triggering TCS under sub-section (1 H) of section 206C shall be computed from 1 April, 2020,” the income tax department further added.

Adjustment for sale return, discount or indirect taxes

The income tax department clarified that no adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under sub-section (IH) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration.

Applicability to sale of motor vehicle:

The provisions of sub-section (1 F) of section 206C of the Act apply to sale of motor vehicle of the value exceeding 10 lakh. Sub-section (1H) of section 206C of the Act exclude from its applicability goods covered under sub-section (IF).

It may be noted that the scope of sub-sections (IH) and (IF) are different. While sub-section (1 F) is based on single sale of motor vehicle, sub-section (1 H) is for receipt above 50 lakh during the previous year against aggregate sale of good. While sub-section (1F) is for sale to consumer only and not to dealers, sub-section (1H) is for all sale above the threshold.

The CBDT clarified

(i) Receipt of sale consideration from a dealer would be subjected to TCS under sub-section (I H) of the Act, if such sales are not subjected to TCS under sub-section (1 F) of section 206C of the Act.

(ii) In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value of 10 lakh or less to a buyer would be subjected to TCS under sub-section (1 H) of section 206C of the Act, if the receipt of sale consideration for such vehicles during the previous year exceeds 50 lakh during the previous year.

(iii) In case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value exceeding 10 lakh would not be subjected to TCS under sub-section (lH) of section 206C of the Act if such sales are subjected to TCS under sub-section (IF) of section 206C of the Act.

 

The income tax department said, section 194-0, and subsection (I H) of section 206C, of the Act shall not be applicable in relation to

1) Transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service.

2) Transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC.

 

 

 

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