No TDS u/s 194-O is required on E-Auction Services: CBDT issues Guidelines [Read Circular]

TDS - E-Auction Services - CBDT - Taxscan

The Central Board of Direct Taxes (CBDT) has issued the Guidelines which states that no TDS under section 194-O of the Income Tax Act is required on E-Auction Services.

The Board has received representations from various stakeholders involved in the business of carrying out e-auction services through an electronic portal owned, operated, or maintained by e-auctioneer. It has been stated that in an e-auction, the e-auctioneer involved in conducting the e-auction through its portal is responsible only for the price discovery for the sale/purchase of goods or services and the result of the auction report is submitted to the client. The client could be the buyer or the seller. Participants in the auctions are sellers (if the client is the buyer) or buyers (if the client is the seller). The transaction of sale/purchase is being carried out directly between the buyer and the seller which is not done through the electronic portal of the e-auctioneer. Further, the price so discovered can be further negotiated between the parties without the knowledge of the e-auctioneer. In such a scenario, it has been represented that provisions of section 194-0 of the Act do not apply as the transaction of sale/purchase itself is not taking place through the electronic portal.

The e-auctioneer conducts e-auction services for its clients in its electronic portal and is responsible for the price discovery only which is reported to the client.

The price discovered through the e-auction process is not necessarily the price at which the transaction takes place and it is up to the discretion of the client to accept the price or to directly negotiate with the counterparty.

Sub-section (IA) of section 206C of the Act provides that notwithstanding anything contained in sub-section (I) of the said section, no tax is to be collected in case of a buyer, who is a resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration to the effect that the goods (as referred to in sub-section (I)) are to be utilized for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes.

As per the provisions of sub-section (IH) of section 206C of the Act, tax is to be collected in respect of the sale of goods other than the goods which have not been covered under sub-section (I) or sub-section (IF) or sub-section (IG). It has been represented that in case of goods that are covered under the provisions of sub-section (I) of the said section but exempted under sub-section (IA), the tax will not be collectible under either sub-section (I) or sub-section (IH) of section 206C as the provisions of sub-section (IH) categorically exclude the goods which are covered under sub-section (I) of section 206C. It has been requested to clarify if the provisions of section 194Q of the Act will be applicable in such cases.

The issue has been examined. It is seen that the provisions of section 194Q of the Act do not apply in respect to those transactions where tax is collectible under section 206C [except sub-section (IH) thereof of the Act. Since by virtue of sub-section (IA) of section 206C of the Act, the tax is not required to be collected for goods covered under sub-section (I) of the said section, it is hereby clarified that in such cases, the provisions of section 194Q of the Act will apply and the buyer shall be liable to deduct tax under the said section if the conditions specified therein are fulfilled.

There have been representations from departments of the Government (both Central Government and State Government), to enquire if such a department is required to deduct tax under the provisions of section 194Q of the Act.

The Board has clarified that any other person, such as a Public sector Undertaking or corporation established under Central or Stale Act or any other such body, authority or entity, shall be required to comply with the provisions of section 194Q and tax shall be deducted accordingly.

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