Providing clarification on the 1 per cent tax deducted at source (TDS) on e-commerce transactions, the CBDT on Tuesday said that that the payment gateway will not be required to deduct the tax under section 194-0 of the Income-Tax Act on a transaction, if the tax has been deducted by the ecommerce operator under the section concerned of the Act, on the same transaction.
The Central Board of Direct Taxes (CBDT) on Tuesday issued guidelines for applicability of TCS (tax collected at source) provision which requires an e-commerce operator to deduct 1 per cent tax on sale of goods and services with effect from October 1.
The CBDT circular noted that in e-commerce transactions, the payments are generally facilitated by payment gateways.
It is represented that in these transactions, there may be applicability of section 194-0 twice, once on e-commerce operator who is facilitating the sale of goods or provision of services or both and once on payment gateway who also happen to qualify as e-commerce operator for facilitating service.
"In order to remove this difficulty, it is provided that 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 ecommerce operator under section 194-0 of the Act, on the same transaction," it said.
Elucidating its implementation, the circular said: "If 'XYZ' has deducted tax under section 194-0 on one lakh rupees, 'ABC' will not be required to deduct tax under section 194-0 of the Act on the same transaction. To facilitate proper implementation, 'ABC' may take an undertaking from 'XYZ' regarding deduction of tax."
The CBDT also said that the new introduced TCS provisions would not apply to transactions in securities and commodities which are traded through recognised stock exchanges or cleared and settled by recognised clearing corporation, including recognised stock exchanges or recognised clearing corporation located in International Financial Service Centre.
It would also not apply to transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges, circular added.
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