The Open Network, for Digital Commerce (ONDC), has made a difference in the India's e-commerce sector ensuring that it is now easily accessible and inclusive, for all individuals. However, as e-retailers navigate this landscape they may encounter concerns regarding their tax deducted at source also known as TDS. In this blog, we will delve into the details of the clarifications made by CBDT to ensure a transition for businesses entering the exciting world of ONDC.
Central Board of Direct Taxes (CBDT) has provided clarifications on the TDS requirements for e-retailers operating on ONDC. TDS duty for e-retailers on ONDC has always been a topic of controversy. However, recent clarification has shed light on the matter, providing clarity for online businesses wishing to enter the domain of ONDC. Understanding TDS in e-commerce under the Indian Income Tax Act of 1961 is crucial for e-commerce companies. This legislation designates e-commerce platforms as ECOs and requires them to collect TDS at a rate of 1% on the selling price of items and services made available through their platform. This obligation guarantees a streamlined tax collection process by collecting tax at the source.
ONDC is revolutionizing the game by creating a network that directly connects customers and sellers bypassing e-commerce platforms. This decentralized setup raises concerns about who should be responsible for TDS (Tax Deducted at Source) on transactions. With buyers and sellers engaging it becomes crucial to ascertain whether the responsibility lies with the parties involved or if a new framework needs to be established to ensure proper tax collection on ONDC transactions.
1. Gross Sale Value Defines Base: The TDS is calculated on the gross sale value, encompassing the entire amount received by the supplier, including convenience fees, packaging charges, and shipping costs borne by the buyer.
2. Multiple ECO Involvement: In situations where multiple ECOs facilitate different stages of the transaction on ONDC, the final supplier responsible for the sale remains the TDS deduction point.
3. Record-Keeping Requirements: Suppliers engaged in ONDC transactions must maintain proper records of relevant details, including sales invoices, buyer information, and TDS deducted, to comply with tax regulations.
1. Understanding and Complying: E-retailers on ONDC need to grasp their new TDS obligation and ensure compliance to avoid potential penalties. Familiarizing themselves with the CBDT guidelines and seeking professional tax advice is crucial.
2. Technology Integration: E-commerce platforms operating on ONDC need to incorporate systems and functionalities to facilitate smooth TDS deduction and reporting by suppliers. This can involve automating the capture and storage of important transaction data, as well as deploying secure payment channels that can deduct TDS at the moment of purchase. Furthermore, e-commerce platforms should consider giving training and assistance to their suppliers to guarantee that they understand and comply with the TDS standards.
3. Transparency and Communication: Maintaining transparent communication with buyers regarding the inclusion of TDS in the final sale price helps build trust and avoid confusion. E-commerce platforms must adequately convey to buyers the TDS deduction process, including how it impacts the ultimate selling price. Clear and straightforward explanations on product websites or throughout the checkout process can help with this. Furthermore, giving customer assistance channels for any queries or complaints about TDS can improve transparency and customer satisfaction.
Navigating the evolving tax landscape in the digital commerce space can be challenging. However, by comprehending the nuances of TDS applicability on ONDC and adapting your business practices accordingly, you can confidently seize the opportunities offered by this transformative platform. Remember, knowledge is your key to success in the dynamic world of online business.
E-commerce platforms that use ONDC should incorporate technology to make TDS deduction and reporting easier for suppliers. This includes automated transaction data-collecting methods and secure payment channels. Supplier training and assistance are also critical. Transparency and communication are critical for establishing trust and preventing misunderstandings.
Buyers should explicitly explain the TDS deduction procedure, including its influence on the final selling price, by platforms. Providing customer assistance channels can improve transparency even more. Navigating the changing tax landscape in digital commerce can be difficult, but knowing the TDS application on ONDC and modifying company procedures will assist in capitalizing on possibilities in the revolutionary digital economy.
TDS: Understanding Tax Deducted at Source in India
