TDS u/s 194-O do not apply in relation to E-Auction Services: CBDT Clarifies

Central Board of Direct Taxes [CBDT] has received Various Representations have been received from various stakeholders involved in the business of carrying out e-auction services through an electronic portal owned, operated, or maintained by them (hereinafter referred as ‘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 client is buyer) or buyers (if the client is seller). The transaction of sale/ purchase is being carried out directly between the buyer and the seller which are 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.

From the representations made, the following facts have been noticed:

(a) The e-auctioneer conducts e-auction services for its clients in its electronic p0l1al and is responsible for the price discovery only which is reported to the client.
(b) The price so discovered through 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 counter-party.
(c) The transaction of purchase/sale takes place directly between the buyer and the seller party outside the electronic portal maintained by the e-auctioneer and price discovery only acts as the starting point for negotiation and conclusion of purchase/sale.
(d) The e-auctioneer is not responsible for facilitating the purchase and sale of goods for which e-auction was conducted on its electronic portal except to the extent of price discovery.
(e) Payments for the transactions are carried out directly between the buyer and the seller outside the electronic portal and the e-auctioneer does not have any information about the quantum and the schedule of payment which is decided mutually by the client and the counterparty.
(f) For payment made to e-auctioneer for providing e-auction services, the client deducts tax under the relevant provisions of the Act other than section 194-0 of the Act.

In order to remove the difficulty, it is clarified that the provisions of section 194-0 of the Act shall do not apply in relation to e-auction activities carried out bye-auctioneers if all the facts are listed at (a) to (f) of para 5.1.2 of the Circular are satisfied. This clarification shall not apply if any of these facts are not satisfied. Further, it is clarified that the buyer and seller would still be liable to deduct/ collect tax as per the provisions of section 194Q and 206C (1H) of the Act, as the case may be.