Taxability of E-commerce Transactions in India

Taxation is one of the most vital aspects of running an e-commerce business in India. Read this post to know how e-commerce transactions are taxed in India.

Electronic commerce or e-commerce has significantly transformed businesses in India. According to the IBEF report, the e-commerce market in the country is expected to surpass US$111.40 billion by 2025 from US$46.2 billion in 2020. Several new international and domestic businesses have ventured into the Indian e-commerce industry to benefit from its vast potential.

Apart from forcing businesses to reimagine their operations, the e-commerce sector has also created a host of challenges related to taxation. Most leading e-commerce platforms rely on tax advisory services to navigate through the complex tax provisions of the country.

If you are about to launch an e-commerce platform, then here are some of the most important things you should know about the taxability of e-commerce transactions in India-

  1. TDS on E-commerce Transactions

Under Section 194-O of the IT Act, payments made to e-commerce operators or participants are subject to TDS (Tax Deducted at Source).

An e-commerce operator is someone who operates, owns, or manages electronic/digital facility that sells goods or services. An e-commerce participant is someone who sells goods, services, or both through the digital facility provided by the e-commerce operator. Here’s how TDS is deducted on e-commerce transactions-

  • Operators are required to deduct TDS at 1% while crediting the amount from the sale of goods, services, or both to e-commerce participants or when making payments to the participants through other modes, whichever is earlier.
  • The operators are not required to deduct TDS if the gross amount from sale in the previous year is below Rs. 5 lakhs and the participant has submitted PAN or Aadhaar.
  • If the participant has not furnished PAN or Aadhaar, then TDS should be deducted by the operator at 5%.
  • No TDS will be deducted if the participant is a non-resident.

TCS on E-Commerce Transactions

Under Section 52 of the CGST Act, e-commerce operators should collect TCS (Tax Collected at Source) at 0.5% (under CGST and SGST each) or 1% (under IGST) on the net value of the taxable supplies made through their digital facility by suppliers.

Operators who collect TCS from the suppliers should furnish detailed information of the outward supplies of goods or services or both in an electronic statement in Form GSTR-8 with 10 days at the end of every month when the TCS is collected.

  1. Equalization Levy on E-commerce Transaction

Equalization levy is governed by Chapter VIII of the Finance Act. It is a direct tax applicable to the income of non-resident e-commerce operators in India. As per the provisions of Chapter VIII of the Finance Act, an equalization levy of 2% is applicable to the net income of non-resident e-commerce operators.

Here are some important points related to the equalization levy-

  • Equalization levy is separate from income tax.
  • Under clause 50 of Section 10, receipts that are subject to equalization levy are exempt from income tax.
  • Apart from e-commerce operators, the equalization levy is also applicable to non-resident e-commerce suppliers and service providers, including advertisement sellers and data sellers.

E-commerce Taxation Made Easier with Tax Advisory

Matters related to taxes could have severe implications for any e-commerce business. Hiring professional tax advisors is one of the most effective ways to take maximum advantage of the available deductions and operate in a transparent and tax-efficient manner.

Apart from tax consultation, reputed business consultants also offer global outsourcing services to help e-commerce businesses grow and comply with the changing requirement in local and international markets.

Comments are closed.