Section 194 O
This query is : Resolved
09 August 2024
Hi Everyone,
TDS is deducted under section 194O by the E Commerce operator. This income was against an international project . Hence it is shown as export of service in GST without payment of tax. Is that ok? Does reporting under section 194 O means it should be shown as Indian Income and charge GST?
Thanks in advance
TDS is deducted under section 194O by the E Commerce operator. This income was against an international project . Hence it is shown as export of service in GST without payment of tax. Is that ok? Does reporting under section 194 O means it should be shown as Indian Income and charge GST?
Thanks in advance
12 August 2025
1. Section 194O TDS Overview
Section 194O mandates e-commerce operators to deduct TDS @1% on payments to sellers.
It applies irrespective of whether the supply is goods or services.
The TDS is on the income earned by the seller through the e-commerce platform — essentially Indian income tax compliance.
2. Export of Services & GST
Export of services is treated as a zero-rated supply under GST, meaning:
GST is charged at 0%.
No GST payment is required.
You can claim input tax credit (ITC) if applicable.
The key for export under GST is:
Supplier and recipient locations (supplier in India, recipient outside India).
Payment in convertible foreign exchange or in Indian rupees wherever permitted.
3. Is it correct to show income as export of services with zero GST?
Yes, export of services under GST is zero-rated, so no GST payment is due.
TDS under Section 194O is independent of GST and is deducted on income taxable under Income Tax Act.
4. Does reporting under 194O mean income is Indian income and GST is charged?
No.
Reporting under Section 194O means the e-commerce operator deducts tax on the income earned by the seller, which is Indian tax compliance.
The nature of the transaction (export of service) and GST applicability remain unchanged.
Export of service is still zero-rated under GST, so no GST is charged on export even if TDS is deducted under 194O.
Section 194O mandates e-commerce operators to deduct TDS @1% on payments to sellers.
It applies irrespective of whether the supply is goods or services.
The TDS is on the income earned by the seller through the e-commerce platform — essentially Indian income tax compliance.
2. Export of Services & GST
Export of services is treated as a zero-rated supply under GST, meaning:
GST is charged at 0%.
No GST payment is required.
You can claim input tax credit (ITC) if applicable.
The key for export under GST is:
Supplier and recipient locations (supplier in India, recipient outside India).
Payment in convertible foreign exchange or in Indian rupees wherever permitted.
3. Is it correct to show income as export of services with zero GST?
Yes, export of services under GST is zero-rated, so no GST payment is due.
TDS under Section 194O is independent of GST and is deducted on income taxable under Income Tax Act.
4. Does reporting under 194O mean income is Indian income and GST is charged?
No.
Reporting under Section 194O means the e-commerce operator deducts tax on the income earned by the seller, which is Indian tax compliance.
The nature of the transaction (export of service) and GST applicability remain unchanged.
Export of service is still zero-rated under GST, so no GST is charged on export even if TDS is deducted under 194O.
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