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Open Network For Digital Commerce (ONDC)has welcomed the recent guidelines issued by the Central Board of Direct Taxes (CBDT) on the 1% income tax deduction on the total amount of goods or services sold by e-commerce firms operating within a multiple-operator model framework.

These guidelines, according to ONDC, will provide clarity for participants in the ONDC ecosystem, ensuring a clear understanding and adherence to tax implications.

As per Section 194-O of the Income Tax Act, 1961, e-commerce operators are required to deduct income tax at the rate of 1% on the gross amount from the sale of goods or provision of services, or both, facilitated through their digital/electronic facility or platform.

“We believe that by providing clarity on the application of Sec 194-O to network models of digital trade where multiple e-commerce entities are involved, these guidelines will contribute to the ease of doing business on the ONDC network and strengthen the compliance framework for digital transactions,” ONDC said in a statement. 

“CBDT Circular 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,” said CBDT in a statement.

The circular also elaborates various situations with examples, offering clarity on several issues. In response to representation from numerous quarters, it has been updated to include frequently asked questions.