Why the circular on withholding tax for online retailers needs more clarity
Multi-platform transactions: When transactions involve multiple e-commerce operators, such as Open Network for Digital Commerce or ONDC, the responsibility to deduct TDS falls on the operator directly engaged in payment transactions with the seller. For instance, a buyer-side e-commerce operator (ECO) facilitates interaction with the buyer, while a seller-side ECO manages interaction with the seller. In such scenarios, the seller-side ECO, responsible for making the actual or deemed payment to the seller, must deduct the applicable taxes.
Service charge clarification: Whether a seller is required to withhold taxes on the amount of various charges paid to the ECO for their services (such as logistics, shipping or commission charges) has always been a matter of debate. Charges paid to e-commerce operators for ancillary services (like logistics or commissions) linked to the primary sale or service do not necessitate TDS by the seller, simplifying tax obligations. Handling returns: E-commerce operators can adjust TDS for returned goods in subsequent transactions with the same seller within the fiscal year, providing a practical solution for handling returns.
No adjustment is required if the returned goods are replaced by the seller though. The circular has also clarified the treatment of Goods and Services Tax (GST) and discounts. Services provided by an e-commerce operator's group entities, although integral to a transaction, are not covered under the current guidelines.
For example, at times, packing and transportation services are invoiced and rendered by a group entity of the ECO. Such services are related to the main transaction of sale of goods undertaken on the ECO’s platform. The circular also limits adjustments for
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