Clarity for ONDC Sellers: CBDT Outlines TDS Deduction Guidelines

29 Dec 2023 , 01:43 PM

The application of TDS responsibility for online shops using the government’s open network digital commerce system has been made clearer by the Income Tax department.

The Central Board of Direct Taxes (CBDT) on Thursday released a FAQ in which it states that, after accounting for convenience, packaging, and shipping fees that e-commerce trading platforms charge for orders placed on ONDC, a 1% 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).

According to the law, each e-commerce company selling goods or services through its platform must deduct TDS at the rate of 1% of the total sales amount.

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.

On December 31, 2021, ONDC was incorporated as a Section 8 business.

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 programme.

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