The Central Board of Direct Taxes (CBDT) on Tuesday issued guidelines for applicability of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) for e-commerce transactions effective October 1. The levies will be applicable on sales of goods exceeding Rs 50 lakh, with exemption to an individual and HUF who receives less than Rs 5 lakh and furnishes PAN/Aadhaar. The TDS is proposed to be levied on e-commerce transactions at 1 per cent in PAN/Aadhaar cases.
The proposed TDS/TCS will not be applicable for transactions in securities and commodities which are traded through recognised stock exchanges or cleared and settled by the recognised clearing corporation, including recognised stock exchanges or recognised clearing corporations located in the International Financial Service Centre as well as transactions in electricity, renewable energy certificates and energy saving certificates traded via power exchanges, CBDT said.
A payment gateway will not be required to deduct tax on a transaction, if the tax has been deducted by the e-commerce operator. For an insurance agent or insurance aggregator, the CBDT said if the insurance agent or insurance aggregator has no involvement in transactions between insurance company and the buyer of insurance policy after the first year of policy, he would not be liable to deduct tax for subsequent years but the insurance company will be required to deduct tax on commission payment, if any, made to the insurance agent or insurance aggregator for those subsequent years. TCS will be applicable on sale of motor vehicles from October 1 for value less than Rs 10 lakh for sales to consumers.
Tax experts said some more clarity is required on issues such as applicability of TCS provisions on deemed exports to SEZ units. “The circular clarifies on several puzzling aspects such as no adjustment for sales return, discount or GST component and applicability on receipts post October 1, even if sales was made before that period.however, several ambiguous aspects need more clarity such as applicability of TCS provisions on deemed exports within India to SEZ and EOU units, free of cost sales and warranty replacements. On e-commerce TDS, the most significant uncertainty is around treatment of subsequent returns of goods by customers and consideration of discount codes and gift vouchers for computing amounts to be subject to TDS. Foreign e-commerce operators also need to comprehend the interplay between Section 194-O and Equalisation Levy when supply of goods or provision of services encompasses resident e-commerce participants,” Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP said.
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