Finance Minister Nirmala Sitharaman on Saturday proposed a new tax levy on e-commerce transactions as part of measures to widen the tax base.
“In order to widen and deepen the tax net, it is proposed to provide that e-commerce operator shall deduct TDS on all payments or credits to e-commerce participants at the rate of 1% in PAN/Aadhaar cases and 5% in non-PAN/Aadhaar cases,” the Minister said in her Budget speech. However, with a view to providing relief to small businessmen, individuals and HUF who receive less than ₹5 lakh and furnish PAN/Aadhaar would be exempt from the TDS norm.
According to the Memorandum that was part of the Budget documents placed before Parliament, an e-commerce operator is defined as any person who owns, operates or manages digital or electronic facility or platform for electronic commerce and is a person responsible for paying to e-commerce participant. An e-commerce participant is defined as a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for e-commerce.
India’s e-commerce market is expected to grow to $200 billion by 2026 from $38.5 billion as of 2017, according to a November 2019 presentation by the India Brand Equity Foundation (IBEF) on its website. A large part of the industry’s growth had been triggered by increasing Internet and smartphone penetration, IBEF said.
The relevant amendment to the Income Tax Act would take effect from April 1, 2020.
