E-commerce firms to collect 1 pc TDS from sellers under new levy

The government on Saturday proposed a new levy of 1 per cent TDS (tax deducted at source) on e-commerce transactions, a move that could increase burden on sellers on such platforms.

"In order to widen and deepen the tax net by bringing participants of e-commerce (sellers) within tax net, it is proposed to insert a new section 194-O in the Act so as to provide for a new levy of TDS at the rate of one per cent," according to Budget 2020-21 documents.

Also, consequential amendments are being proposed in Section 197 (for lower TDS), in Section 204 (to define person responsible for paying any sum) and in Section 206AA (to provide for tax deduction at 5 per cent in non-PAN/Aadhaar cases).

The amendments will take effect from April 1, 2020.

The documents said the e-commerce operator -- an entity owning, operating or managing the digital platform -- will have to deduct 1 per cent TDS on the gross amount of sales or service or both.

This provision will not apply in cases where the seller's gross amount of sales during the previous year through the e-commerce operator is less than Rs 5 lakh and the seller has furnished his PAN or Aadhaar number.

While Flipkart and Snapdeal did not comment, Amazon said it was studying the proposal.

BookMyShow Head (Finance) Mitesh Shah said compliance on e-commerce has been increased by mandating them to deduct a TDS of 1 per cent on all goods and services sold on e-commerce platforms.

"This would be in addition to TCS (tax collected at source) under GST (goods and services tax) and this amendment might further increase the cost of compliance for e-commerce companies," he added.