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Understand the Most Important FAQs on TCS on E-Commerce

Oct 12, 2020

FAQ-on-TCS

[Payment of certain amounts by an e-commerce operator to an e-commerce participant].

Finance Act 2020 introduced a new section in the form of Section 194O to the Income Tax Act 1961 related to collection of tax by E-Commerce Operator. The below changes have taken effect from October 01, 2020.

We have summarized the provisions of section 194O in an easy to understand language as below:

1) An e-commerce operator (i.e. E-Marketplace) must deduct TCS @ 1% (0.75% for FY 20-21) at the time of credit of amount of sale of goods or services or both to the account of an e-commerce participant (i.e. Seller on e-Commerce Platform) or at the time of payment thereof to such e-commerce participant.

2) TCS shall be calculated on gross payment amount. This means if any charges are deducted by E-Commerce operator, that shall not be reduced for TCS calculation.

3) TCS is also applicable and shall be deducted even if the Seller has directly delivered the goods/services and/ or received the payment directly from the purchaser if the transaction was facilitated by an e-commerce operator.

4) TCS shall not be deducted from Individuals and HUFs if the gross amount on the platform doesn’t exceed/doesn’t likely to exceed Rs. 5 lakhs for that year. However, to get this exemption, the e-commerce operator must collect Permanent Account Number or Aadhaar Number of the seller.

5) No other TDS shall be applicable to transactions where TCS has been deducted by E-Commerce Operator or it is exempted based on the above amount limit for Individual or HUF Sellers.

6) In case the Seller does not furnish PAN or Aadhar Number to the e-commerce operator, TDS shall be deducted at the rate of 5% under section 206AA of the Act

7) The Limit of Rs. 5 lakhs shall be calculated by E-commerce operators for themselves for each seller.

Explanation of Certain Key terms:

a) "Electronic commerce" it implies that the supply of items or services or both, including digital items, over a digital or electronic network.

b) “E-commerce operator" it implies that an individual who own, operate and control digital or electronic platform or facility for electronic commerce.

c) "E-commerce participant" it implies that an individual who is a resident in India selling items or offering services or both, incorporating digital items, through a digital or electronic platform or facility for electronic commerce.

d) "Services" involve "technical service fees" and "professional service fees", as described in the Explanation to section 194J.

Vikas Mandawewala

Vikas Mandawewala is a Rank Holder Chartered Accountant and Rank Holder Company Secretary.
He has done his CPA (US-NY and US-CO), CIA (US), and CISA (US). He is also a Registered Valuer (India). He has been providing Virtual CFO services to various startups and mid-sized companies in India.