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CBDT Explains How TDS Obligation Applies to Online Businesses on ONDC

CIO Insider team | Friday, 29 December, 2023
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The income tax department provides clarification on whether online retailers using the government's ONDC initiative are subject to TDS liability.

The Central Board of Direct Taxes (CBDT) FAQ states that, in addition to the convenience, packaging, and shipping fees that e-commerce trading platforms charge for orders placed on ONDC, a one percent TDS must be subtracted from the gross sale amount.

The Department for Promotion of Industry and Internal Trade (DPIIT) recently launched the Open Network for Digital Commerce (ONDC), and as such, the CBDT has received comments asking for clarification on who is responsible for complying with I-T legislation regarding Tax Deducted at Source (TDS).

As mandated by law, all e-commerce companies must deduct TDS at the rate of one percent on the total sales amount of products or services sold on their platform.

The DPIIT is launching an initiative to develop a model of facilitation to assist small merchants in using digital commerce

The CBDT has made it clear that when several e-commerce operators (ECOs) are using the ECO platform to complete a single transaction, the supplier must complete the TDS compliance before the supplier is paid.

The DPIIT is launching an initiative to develop a model of facilitation to assist small merchants in using digital commerce. It is a set of specifications intended to promote open, unbundled, and interoperable open networks rather than an application, platform, middleman, or program.

A client puts an order through an e-commerce platform and pays the supplier for the goods or services under the inventory model. In this instance, upon paying the vendor, the e-commerce platform deducts Tax Collected at Source (TCS).

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