In a significant development, the Central Board of Direct Taxes (CBDT) has issued clear guidelines for e-retailers operating on the government’s Open Network for Digital Commerce (ONDC) regarding the adoption of Tax Deducted at Source (TDS).
E-retailers on the ONDC are now mandated to deduct 1% TDS from the total sale amount, which includes additional fees like convenience, packaging, or shipping charges imposed by the e-commerce platform.
This clarification comes in response to concerns raised by the ONDC, initiated by the Department for Promotion of Industry and Internal Trade, regarding TDS compliance responsibility in transactions involving multiple e-commerce operators (ECOs).
The CBDT clarified that in such transactions, where multiple ECOs are involved, the responsibility for TDS compliance lies with the supplier side—the party releasing the payment to the supplier. If the seller-side ECO is not the actual seller, the ECO responsible for making the payment must deduct 1% TDS on the gross amount of the sale.
Importantly, the guidelines specify that TDS should be deducted not only on the actual sale amount but also on additional charges like convenience fees, logistics, and delivery fees. The 1% TDS must be deducted from the total gross amount invoiced to the buyer, covering charges from both seller and buyer-side ECOs.
The CBDT also addresses the treatment of GST and other indirect tax levies, stating that if these taxes are separately indicated on the invoice and tax is deducted during the amount’s crediting to the seller, they should not be included in the gross amount for TDS calculation.
Furthermore, the guidelines provide clarity on adjusting TDS in cases of purchase returns. If TDS has already been deducted and deposited for a transaction later returned, the e-commerce operator can adjust this TDS against the next purchase within the same fiscal year.
These comprehensive guidelines aim to streamline TDS compliance for e-retailers on the ONDC, ensuring transparency and adherence to tax regulations in the evolving landscape of digital commerce.
