CBDT issues Guidelines for TDS/ TCS by E-Commerce Operators and Sellers of Goods valued at more than INR 50 lakh

The Central Board of Direct Taxes (CBDT) issued Guidelines for Tax Deduction at Source (TDS) by e-commerce operators and TCS by sellers of goods where the sale consideration exceeds INR 50 lakh. The Circular containing these Guidelines was issued on 29th September 2020.

The Circular points out, firstly, that by virtue of the Finance Act, 2020, e-commerce operators must deduct TDS at the rate of 1% of the gross amount of the sale of goods or provision of services. Such sale of goods and provision of services must have been made through its digital or electronic platform. Such deduction may also be subject to exceptions.

Secondly, the Finance Act, 2020 also stipulated that sellers of goods whose value exceeds INR 50 lakh also have to collect TCS from the buyer at the rate of 0.1% of the sale consideration. The collection must be made at the time of receipt of the amount of sales consideration.

Both of these provisions come into effect from 1st October 2020.

The following are some of the clarifications issued through the Guidelines:

Applicability of the Provisions on Transactions carried on Through Exchanges

The Guidelines clarify that both the above provisions of TDS/ TCS will not apply to the following:

  • Securities and commodities transactions that are traded through recognised stock exchanges (SEs) or cleared and settled through recognised clearing corporations (CCs), including those in the International Financial Service Centre (IFSC)
  • Transactions in electricity or renewable energy and energy saving certificates that are traded through registered power exchanges.
Elimination of Duplication of Tax on Single E-Commerce Transaction

The Guidelines recognise that it may so happen that a single e-commerce transaction could be subject to TDS twice, once by the e-commerce operator and once by the payment gateway. This is because the payment gateway also qualifies as an e-commerce operator.

Therefore, to eliminate such a situation, the Guidelines clarify that if the e-commerce operators deduct TDS on such a transaction, the payment gateway will not be required to deduct TDS on the same transaction. In order to ensure a smooth implementation of this, the e-commerce operator is required to make an undertaking to the payment gateway that it will deduct the TDS itself.

Other Clarifications

TCS will not apply on the sale consideration received for fuel supplied to foreign airlines at airports in India.

Further, no adjustment on account of sale return or discount or indirect taxes, including GST, is required to be made for the purpose of TCS.

From 1st October 2020, TCS will be applicable on sale of motor vehicles to consumers for values less than INR 10 lakh.

Additionally, the Guidelines also cover clarifications in respect of applicability of the TDS/ TCS provisions on an insurance agent or insurance aggregators and calculation of threshold for Financial Year 2020-21.