Analysis of section 194-O of the Income Tax Act, 1961

This section shall be effective from 1st October 2020. As per the provisions of this Act, this section overrules any other provisions contained in part B of this chapter.

Before going to the provisions of this chapter, let us first understand a few definitions.

1. Electronic Commerce: It means supply of goods or services or both including digital products over digital or electronic mode.
2. E-Commerce operator: It means a person who owns, operates or manages digital or electronic facilities or platform for electronic commerce
3. E-Commerce participant: It means a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce.
4. Services: Services include fee for technical services and fee for professional services as defined u/s 194J.

As per the provisions of this act, where an sale of goods or provision of service made by an e-commerce participant using the digital platform of an e-commerce operator, then such e-commerce operator shall at the time of credit of amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier deduct income tax at the rate of 1% of the gross amount of such sale or service or both.

Explanation: For the purpose of this sub-section, any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant for the sale of goods or provisions of services or both, then such payment shall be deemed to be made by an e-commerce operator to an e-commerce participant.

Where the e-commerce participant has furnished his PAN and Aadhaar Number to the e-commerce operator and amount paid or credited or likely to be paid or credited does not exceed five lakh rupees, then such e-commerce operator is not liable to deduct TDS.

The e-commerce participant is not liable to get his tax deducted under any other section. If, tax has been deducted or is not liable to be deducted (because the amount does not cross the above threshold).

Provided that the provisions of this section shall not apply to the amount or amounts received by an e-commerce operator for hosting advertisements or providing any other service which are not in connection with sale of goods or provision of services or both.