An E-commerce seller is known as a seller who lists its products/ services on E-commerce platforms such as Flipkart, Amazon, etc. But the question that arises is whether & what TDS they need to eliminate. The answer would be likely any other business, TDS compliance involves an E-commerce seller just similarly it is applicable to any other business & they are needed to remove TDS on the basis of the applicable threshold & rates.
Latest Updates
- CBDT vide Circular No. 20 on 28.12.2023 has issued guidelines in relation to the applicability of tax deduction provisions on payment / deemed payment made by an e-commerce operator to an e-commerce participant under section 194-O.
TDS is Needed to be Deducted Payments/fees on Which?
TDS needs to be eliminated on several expenses/fees such as:
- Contracts
- Rent
- Salaries
- Technical fees
- Commission
- Professional fees
- Interest
As per the behaviour of the payment/expense, there are threshold limits & rates at which the TDS elimination has to be created.
When to Eliminate TDS?
With the above concern, the following persons are required for the deduction in the TDS-
- Separate or Sole proprietorship & HUF (in case they are dependent on completing or are completing Tax audit reports within the Income-tax Act).
- LLP
- Company
- Partnership organization
- Society, AOP, etc.
When to Deduct TDS of E-commerce Sellers?
The TDS provision does not classify between an e-commerce seller & other trade. Its provisions are relevant to E-commerce and will be significant as they apply to any trade.
- Therefore, a particular HUF seller in the E-commerce platforms is needed to deduct TDS if they are dependent on completing or are completing a Tax audit report within the Income-tax act
- Tax audit is not relevant even if any other E-commerce seller, such as company LLP, etc is needed to remove TDS
Why Does This Topic Require Special Mention & Why Is this TDS Ignore by E-commerce Sellers?
E-commerce sellers are obtaining a plethora of services from E-commerce platforms such as Flipkart, Amazon, etc. However, they do not appraise the TDS provisions, mainly due to TDS deduction at the time of doing payments ( or credit, whichever is sooner) Within the E-commerce trade, these platforms gather the payment from the consumers & pay the payments to the seller according to their payment cycle later removing their fees like an advertisement, commission, shipping, marketing, handling, storage, collecting and referral and so on.
Now, as the seller obtains the net payment, the need to deduct TDS doesn’t happen to the sellers, even also TDS is relevant on all these payments charged through the e-commerce platforms.
There are few sellers who are about the requirement of TDS, but they don’t eliminate TDS because they do not acknowledge that there is a method prescribed via these platforms to claim back the refund of TDS through completing the TDS certificates to them.
Does any e-commerce seller need to Deduct TDS Even if the e-commerce Platform is Eliminating TDS on Payments Made to Sellers?
Of course yes, E-commerce platforms are eliminating TDS on payments, this comes under section 194-O, which needs the platform to deduct TDS on remittances made to the seller. Similarly, other sections need the sellers to remove TDS on services that have been procured via these platforms.
Does the TDS Contain the Cost to the Seller?
Absolutely not, since, no matter how much TDS you withdraw & deposit to the government shall be accessible as a credit to the E-commerce platforms ( once you submit the returns).
The platforms offer a refund of TDS on completing the TDS certificates, therefore, it does not seem to contain a cost to the seller.
What is the Needful for Withdrawing the TDS?
You are required to have a TAN to withdraw the TDS.
What is the Procedure to Comply with the TDS Requirements?
You need to go through the mentioned comply:
- Evaluate the TDS on which the behaviour of services/expenses & relevant sections
- Deposit TDS with the authority on the basis of the month ( 7th of next month)
- Submit TDS return every 6 months by the end of next month after the quarter-end
- Generate TDS certificates in forms 16/16A
- Complete the TDS certificates to e-commerce platforms & claim a refund
What is the Consequence of Not Complying with the TDS Provision?
The Income Tax Act needs to follow and comply with the TDS provisions, which are as follows –
- Interest in late/non-deduction of TDS
- Fine on late /non-deduction of TDS
- Penalty for late /non-filing of TDS returns
- Disclaimer of expenditures because of non – compliance with TDS provisions.
