The Central Board of Direct Taxes (CBDT) has clarified that any payment made by the buyer or seller in a transaction facilitated by the e-commerce operator (ECO), shall be included in the gross amount of sales of goods or services for the purpose of 1% Tax Deduction at Source (TDS).
In Budget FY20, the TDS provision was brought in, making it mandatory for e-commerce operator (buyer) to deduct tax on payments made to the e-commerce seller on gross sales exceeding Rs 5,00,000 in a financial year. The relevant Section 194-O came into effect on October 1, 2020.
In a notification issued on Thursday, the CBDT clarified how the TDS will apply in a multiple ECO framework, such as the Open Network for Digital Commerce (ONDC).
Explaining through FAQ (frequently asked questions), the CBDT notification says that in a situation where multiple ECOs are involved in a single transaction through, say, ONDC, where the seller side-ECO is not the actual seller of goods and services, the tax shall be deducted on the gross amount by the seller-side at the time of credit to the account of the seller.
Seller ECO would file the TDS return in Form 26Q and issue certificate to seller under Form 16A, the notification said.
While, in a situation where the seller-side ECO is the actual seller of goods and services, the TDS to be deduced on the gross amount shall be done by the ECO-2 – which finally makes the payment to seller for the sale of goods and services, the notification clarified.