IT Department issues guidelines for applicability of TCS provision w.e.f October 01, 2020

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The Income Tax Department on Tuesday issued guidelines for the applicability of the TCS provision which requires an e-commerce operator to deduct 1 percent tax on the sale of goods and services with effect from October 01, 2020.

The Finance Act, 2020 inserted a new section 194-O in the Income-tax Act 1961 which mandates that with effect from October 01, 2020, an e-commerce operator shall deduct income tax at the rate of 1 percent of the gross amount of sale of goods or provision of service or both, facilitated through its digital or electronic facility or platform.

The Finance Act, 2020, also inserted sub-section (1 H) in section 206C in the I-T Act which mandates that with effect from October 01, 2020, a seller will collect 0.1 percent tax from the buyer if the sale consideration exceeds Rs 50 lakh or if aggregate sale value exceeded Rs 50 lakh in any previous year.

The Central Board of Direct Taxes (CBDT) said it has received representations regarding difficulties in implementing the provisions of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) contained in section 194-O and sub-section (1 H) of section 206C of the Act in case of certain exchanges and clearing corporations.

It has been stated that sometime in these transactions there is no one-to-one contract between the buyers and the sellers.

The CBDT said the new introduced TCS provisions would not apply to transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by recognised clearing corporation, including recognised stock exchanges or recognised clearing corporation located in International Financial Service Centre.

It would also not apply to transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges.

The Complete Guidelines can be accessed at:

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