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Supplementary clarifications on TDS/TCS on goods/e-commerce transactions
Tax withholding/collection has always been an area of contention between the taxpayers and the tax deductors/collectors. The Finance Act 2020 introduced provisions with respect to tax withholding on e-commerce transactions and tax collection on the sale of goods. The Finance Act 2021 introduced provisions with respect to tax withholding on the purchase of goods. Timely clarifications have also been issued around TDS/TCS applicability around certain specific issues.
Recently, the Central Board of Direct Taxes (CBDT) has again issued clarifications1 with respect to the applicability of withholding Tax/ TCS provisions around certain transactions. These clarifications are summarized in brief hereunder:-
- E-Auction service providers are not subject to the withholding tax provisions on ‘e-commerce transactions,’ contingent upon fulfillment of the prescribed conditions, for the reason that e-auctioneers are only facilitating price determination electronically between the buyer and the seller. However, buyers/sellers of goods, i.e., e-auction participants, would continue to be subject to the tax withholding/collection provisions for the transactions conducted amongst themselves.
- Non-GST levies (like VAT/Excise/Sales Tax/CST) have been accorded similar treatment as GST with respect to withholding tax on the purchase of goods. Therefore, indirect taxes are to be now excluded in case of TDS on goods, where liability to deduct tax has arisen on account of ‘credit’ to the seller, in case of advance payment where there is no quantification of the indirect tax levy, taxes need to be withheld on the entire amount, i.e., inclusive of indirect taxes. Similarly, in the case of purchase return, where purchase return is completed by exchange, GST is not required to be adjusted. However, where purchase return is completed by refund, then excess tax withheld may be adjusted subsequently.
- Withholding tax on the purchase of certain specified goods would continue to be applicable even if such goods have been utilized for the purposes of generation of power, for tax is not collectible on them.
- Any department of the government would not be subject to withholding tax provisions in case goods are purchased from them, for they wouldn’t be deemed to be sellers. However, PSUs or corporations would continue to be subject to withholding tax provisions
1. CBDT Circular 20 of 2021 dated 25 November 2021
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Our Comments
The above clarifications are a welcome move and would aid the government’s initiative for ease of doing business in India, for this will prevent a blockage of much-needed funds.
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