E-commerce has transformed the way business is done in India.Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. The customers are quickly shifting from retail market to online Platforms like Flipcart, Amazon, Snapdeal etc. for their purchase requirements. Similarly, the retail businesses are also shifting from retail market to online platforms. This article discusses about compliances required by entities engaged in e-commerce market.
An e-Commerce operator is a person who owns, operates, or manages a digital/electronic facility for the sale of goods and services. He is responsible for making payments to the e-Commerce participant on such sales.
An e-Commerce participant is a person who sells goods, services, or both through an electronic facility provided by an e-Commerce operator.
Compliances under GST:
Mandatory Registration under GST:
Generally registration requirement under GST arises only once a business entity crosses certain threshold of aggregate turnover.
However, for retails willing to sell their products through online E-Commerce Platforms like Amazon, Flipcart, Snapdeal etc. it is mandatory to get registered under GST irrespective of turnover.
Hence, GST registration has to be obtained before listing of products with these E-Commerce Platforms.
Applicability of TCS:
If the value of goods/services supplied through an e-commerce website is collected by the e-commerce operator, then it is mandatory for every e-commerce operator to collect TCS @ 1% on Net Value of Taxable Outward Supplies (1% IGST for Interstate sales & 0.5% CGST & 0.5% SGST for Intrastate sales) while making payment of such amount to the dealers in accordance with the provisions of per Section 52 of CGST Act, 2017.
Once, TCS Return is filed
The amount of TCS so collected by the operator shall be credited to Electronic Cash Ledger of the dealer. The dealer can utilized this tax credit for making payment of their GST dues.
TCS Return Filing by E-Commerce Operators:
GSTR – 8 is the GST Return required to be filed by every e-Commerce operator who has collected TCS for all the taxable supplies made through it.
The details of taxable supplies and the tax collected at source by the e-commerce operator must be reported in the GSTR-8.
The return in Form GSTR-8 needs to be filed on the GST Portal by 10th of the next month.
Details to be furnished in GSTR-8:
Following details must be furnished by the e-commerce operator in GSTR-8:
1. Details of Supplies attracting TCS:
GSTIN of Supplier (the suppliers’ name gets auto-populated).
The gross value of supplies made and returned to such Supplier by registered as well as unregistered persons;
Enter the amount collected at source under IGST/ CGST/ SGST heads.
2. Amendments to details of supplies attracting TCS:
Enter the correct details against erroneous entries uploaded for any of the previous months in Tile 4- “Amendment to details of Supplies attracting TCS”.
Correction can be made in supplier-wise details related to the particular month and financial year which has been incorrectly uploaded by the e-commerce operator in the earlier period.
Values mentioned against registered vendors and unregistered vendors and TCS deducted against such supplies can be amended.
3. Details of Interest:
View the interest on the delay in payment of the TCS liability, the filing of the TCS return, etc., under “Details of Interest” tile, if any.
4. Payment Details:
After viewing the interest tile, click on the “Payment of Tax” tile to enter the details of taxes paid for that particular month;
Compliance under Income Tax:
TDS Deduction under Section 194O:
Section 194O has been introduced in the Union Budget 2020. According to Section 194O, an e-Commerce operator is required to deduct TDS for facilitating any sale of goods or providing services through an e-Commerce participant.
Accordingly Section 194N, from 1st October 2020, every E-Commerce operator is required to deduct TDS @ 1% at the time of credit of amount of sale of goods/services 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.
Threshold Limit:
No TDS shall be deducted by E-commerce operator if the gross amount of sale of goods, services, or both during the previous year does not exceed Rs 5 lakh.
Rate of Deduction:
TDS under section 194O shall be deducted at the rate of 1% where a valid PAN is furnished by the e-commerce participant.
If the e-Commerce participant does not furnish his PAN, TDS must be deducted at the rate of 5%, as per provisions of Section 206AA.
Residential Status of Deductee/Payee:
TDS under this section must be deducted only if the participant is resident in India. No TDS will be deducted if the participant is a non-resident.
TDS on Payment of Dividend on Mutual Fund [Section 194K]:
Budget 2020 introduced Section 194K which proposes a tax deduction on the amount paid on the units of mutual funds, without a limit, to any resident individual. Earlier such income was exempt from Income Tax under section 10(35). Hence,this new section abolished the older section 10(35) of the Income-tax Act, 1961.This section has come into effect from 1st April 2020.
Section 10(35):
The provisions of section 10(35) offer exemption towards the following:
Any income arising in respect of the units of the specified mutual fund; or
Any income arising in respect of the units from the Administrator of the specified undertaking; or
Any income arising in respect of the units from the specified company.
Thus, in case the income falling within the criteria mentioned above, the entire income was exempted under section 10(35) of the Income Tax Act.
However, with the insertion of section 194K,no exemption under section 10(35) would be available to income arising in respect of units received on or after 1st April 2020.
Nature of Income covered under Section 194K:
Provisions of section 194K are applicable only on payment of dividends by fund houses. No TDS shall be deducted on capital gains arising on redemption of units. Provisions of section 194K are applicable to
following incomes:
Units of a Mutual Fund: Mutual fund means units specified under section 10(23D) of the Income Tax Act.
Units from the Administrator: Administrator means the Administrator, as referred under section 2(a) of the Unit Trust of India (Transfer of the Undertaking and Repeal) Act, 2002.
Units from a Specified Company: Specified company means the company as referred under Section 2(h) of the Unit Trust of India (Transfer of the Undertaking and Repeal) Act, 2002.
Liability to Deduct TDS:
The liability to deduct TDS under this section rests on the shoulders of Mutual Fund Houses distributing dividends to the investors. The deductor must deposit the TDS and file the TDS Return on TRACES.
Deductee under this Section:
Shareholder resident in India earning dividend income on equity mutual funds will receive the amount after TDS under Section 194K.
Shareholder resident in India earning dividend income on equity shares will receive the amount after TDS under Section 194.
NRI investors/shareholders, earning dividend income will receive the amount after deduction of TDS under Section 195.
Rate and Threshold Limit for TDS Deduction:
TDS shall be deducted at the rate of 10% on the amount of dividend paid.
If a valid PAN is not furnished by the deductee, TDS shall be deducted at the rate of 20%.
Threshold Limit for TDS deduction is Rs. 5000. This means no TDS shall be deducted if the total dividend paid/payable in a financial year does not exceed Rs. 5000.
TDS on Repurchase of Units by Mutual Fund or Unit Trust of India [Section 194F]:
Section 194F deals with TDS on payment relating to repurchase of units of Mutual Funds or Unit Trust of India.Under this section,liability to deduct TDS arises on payment of such amount as referred to in Section
80CCB of the Acton repurchase of units issued by them.
Nature of Income Covered:
This section becomes applicable at the time of making payment of any amount referred to in referred to in section 80CCB (2).
Section 80CCB(2):
Section 80CCB (2) of the Income Tax Act refers to the amount which is invested by the assessee in the units being issued under a plan formulated under the Equity Linked Savings Scheme.
The amount so invested has been allowed as a deduction, however, the amount invested (whole or part) is returned back to the assessee by the Fund / Trust either by way of repurchase of the units or on the termination of the plan.
Liability to deduct TDS under this Section:
The mutual fund house or the UTI responsible for paying to any person any amount referred to in sub-section (2) of section 80CCB shall is liable to deduct on such amount.
Rate of TDS and Threshold Limit:
TDS shall be deducted at the rate of 20%at the time of payment of amount as referred to in Section 80CCB of the Act. Please note that there is no exemption limit provided under section 194F. This means TDS shall be deducted irrespective of quantum of payment.
TDS on Payment for Deposit under National Savings Scheme (NSS) [Section 194EE]:
National Savings Scheme is a fixed-income investment scheme backed by the Government of India. The savings bond is suitable for small and medium-income investors to save tax while earning returns. This is a secure and
low-risk product. The primary objective of such schemes is to mobilize savings and help individuals build a substantial corpus eventually. The rates of return under such schemes are revised frequently. The fact that this
scheme is backed by the Government makes it a safe investment options and a preferred instrument for millions of small investors across India.
Liability to Deduct TDS:
Section 194EE of the Income Tax Act, 1961 mandates deduction of TDS on withdrawal of amount deposited under the National Saving Scheme. This section states that the person making payment of amount referred to in section
80CCA(2)(a) is required to deduct TDS.
Rate of TDS and Threshold Limit:
The TDS under section 194EE shall be deducted at the rate of 10%.
Exemption from TDS Deduction under this section:
No TDS shall be deducted under section 194EE in following cases:
If the aggregate amount of payments in a financial year does not exceedRs. 2,500.
Where the payment is made to the heirs of the deceased assessee (depositor), no tax shall be deducted at source.
If a declaration is submitted under section 197A by the recipient to the payer, then no tax is deductible.
Extract of Section 194EE of Income Tax Act, 1961
194EE. The person responsible for paying to any person any amount referred to in clause (a) of sub-section (2) of section 80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of ten per cent :
Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees :
Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee.
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