Section 194-O of the Income-tax Act, 1961 (‘the Act’) provides that an e-commerce operator shall deduct income-tax at the rate of one per cent of the gross amount of sale of goods or provision of service, or both, facilitated through its digital or electronic facility or platform.

Vide CBDT Circular No. 20/2023 dated 28.12.2023 guidelines have been issued for removal of difficulties and clarity has been provided on various issues pertaining to applicability of section 194-O of the Act in a multiple e-commerce operator model framework, such as the Open Network for Digital Commerce (ONDC). The Circular details several types of situations with examples & provides clarity on multiple issues. Having received representations from various quarters, the CBDT Circular incorporates FAQs on varied issues.      

The said Circular is available on www.incometaxindia.gov.in.

E-commerce withholding obligations clarified by CBDT guidance, addressing applicability and compliance in multi-operator digital commerce platforms. Section 194-O imposes a withholding obligation on e commerce operators to deduct tax on gross sales or services facilitated via their platforms; CBDT Circular No. 20/2023 clarifies implementation, addresses multiple operator models such as the Open Network for Digital Commerce with scenario based examples, and provides FAQs to resolve representations and guide operators on which entity is responsible for deduction.