The income tax department on Tuesday evening said payment gateways facilitating e-commerce transactions don’t need to deduct taxes if the e-commerce platform has deducted it already. For proper implementation, e-tailers and payment gateways may have an understanding on the same, the Central Board of Direct Taxes (CBDT) circular said.
Earlier, industry stakeholders had said that tax was being deducted twice — once on e-commerce operators who are facilitating sale of goods or services or both, and once on payment gateways which also happen to qualify as e-commerce operators for facilitating the service.
The government had introduced earlier this year a new withholding tax on e-commerce transactions in the Union Budget. Essentially, companies like Amazon India and Flipkart will withhold an additional 1% tax-deducted-at-source (TDS) while making payments to merchants who sell goods on their platforms. This would be in addition to the GST tax deduction that e-tailers charge online sellers.
After the Union Budget, e-tailers had requested the government to do away with this levy, saying it will impact working capital availability of sellers and create huge compliance burden for e-commerce platforms.
This will come into effect from October 1, CBDT said. Further, it clarified that online insurance aggregators or agents don’t have to deduct the same tax if they are not involved in the transactions between insurance companies and the buyer of insurance policy, subsequent to the first year.
Platforms like PolicyBazaar had requested the government for this differentiation. However, the insurance company shall be required to deduct tax on commission payment, if any, made to the insurance agent or insurance aggregator for those subsequent years, the tax department added.
“In case of gig economy which includes delivery, drivers, plumbers, electricians, etc, they are all now liable for 1% TDS if they deliver their services through an online e-commerce operator,” startup think-tank IndiaTech CEO Rameesh Kailasam said.
Other clarifications included that deduction won’t be applicable to transactions in securities and commodities which are traded, cleared and settled through recognised stock exchanges or recognised clearing corporation located in International Financial Service Centre.
On motor vehicle sales, it added that in case of sale to consumer, receipt of sale consideration for sale of motor vehicle of the value exceeding Rs 10 lakh would not be subjected to tax deductions under sub-section (lH) of section 206C of the Act if such sales are subjected to TDS under sub-section (IF) of section 206C of the Act.