Streamlining E-Commerce Taxes: CBDT Clarifies ONDC’s TDS Compliance Requirements

The Central Board of Direct Taxes (CBDT) has issued clarifications regarding the applicability of Tax Deducted at Source (TDS) liability for e-retailers operating on the Open Network for Digital Commerce (ONDC). As per the recent FAQ released by the CBDT, e-commerce operators are required to deduct TDS at the rate of 1% from the gross sale amount, which includes any convenience, packaging, or shipping fees charged by e-commerce trading platforms for orders placed on ONDC.

This clarification comes as the ONDC, an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT), is gaining traction. The ONDC is not an application, platform, intermediary, or software but is a set of specifications designed to foster open, unbundled, and interoperable open networks, primarily aimed at assisting small merchants in leveraging digital commerce.

One of the key points clarified by the CBDT is in situations where multiple e-commerce operators (ECOs) are involved in a single transaction through the ECO platform. In such cases, the TDS compliance responsibility lies with the supplier who eventually makes the payment to the supplier. This clarification is significant for e-commerce operators as it determines the entity responsible for TDS compliance under the Income Tax laws.

The ONDC, incorporated on December 31, 2021, as a Section 8 company, represents a significant move towards digital inclusivity, offering a level playing field for smaller retailers to benefit from the expanding digital commerce sector. This recent clarification by the CBDT is a step towards ensuring compliance and clarity in the evolving landscape of digital commerce in India.



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