Budget 2024: TDS Rate For Ecommerce Operators Cut To 0.1% From 1%

SUMMARY

Under section 194O of the Income Tax (I-T) Act, 1961, ecommerce operators are mandated to deduct 1% TDS if the gross sales of goods or services or both exceed INR 5 Lakh

In case there are multiple operators participating in the transaction on a platform or network such as ONDC, TDS is deducted by the seller side ecommerce operator

According to Inc42 data, the Indian ecommerce market is projected to grow at a CAGR of 19% to reach a size of $400 Bn by 2031

In her Budget 2024-25 speech, finance minister Nirmala Sitharaman proposed to reduce the tax deducted at source (TDS) for ecommerce operators to 0.1% from 1% earlier.

The finance minister also proposed to decriminalise delay in payment of TDS up to the due date of filing statements for the same.

The government also plans to provide a standard operating procedure for TDS defaults and simplify and rationalise the compounding guidelines for such defaults.

Under section 194O of the Income Tax (I-T) Act, 1961, ecommerce operators are mandated to deduct 1% TDS if the gross sales of goods or services or both exceed INR 5 Lakh. The deduction is made at the time of credit or while making payment to an ecommerce participant.

In case there are multiple operators participating in the transaction on a platform or network such as ONDC, TDS is deducted by the seller side ecommerce operator on the gross sum of sales of goods, comprising packing fees, shipping fees and convenience fees.

Additionally, the finance minister unveiled plans to set up ecommerce export hubs in a public-private partnership (PPP) model to spur growth of MSMEs in the international markets.

These hubs will operate under a seamless regulatory and logistic framework, offering a wide range of trade and export-related services under one umbrella. The move is expected to provide a boost to the ease of doing business for small and medium enterprises (SMEs).

According to Inc42 data, the Indian ecommerce market is projected to grow at a CAGR of 19% to reach a size of $400 Bn by 2031. Homegrown ecommerce startups have raised more than $33 Bn since 2014, attracting investments worth more than $2 Bn in 2023 alone.

Some notable players in the Indian ecommerce industry include Flipkart, Nykaa, Mamaearth, Cars24, among others.