The Central Board of Direct Taxes (CBDT) has exempted power trading transactions through online exchanges like Power Exchange India Ltd (PXIL) from the newly imposed section 194 (O), tax deducted at source (TDS) on e-commerce transactions, and section 206C (1H), tax collected at source (TCS) on sale of goods on e-commerce platforms, of the Income Tax Act, 1961.
The Finance Act, 2020, had imposed a levy of 1 per cent and 0.1 per cent on all e-commerce transactions above Rs 5 million under TDS and TCS, respectively, with effect from October 1.
However, it was observed that there were practical difficulties in the implementation of these taxes in case of power exchanges like securities and commodities transactions traded through the recognised stock and commodities exchanges or cleared and settled through recognised clearing corporations.
A CBDT circular dated September 29 has now clarified that transactions on power exchanges are exempt from the purview of Section 194 O & Section 206 C(1H) of the act.
Among other things, the CBDT circular mentions, “In order to remove such difficulties, it is provided that the provisions of section 194-0, and subsection (I H) of section 206C, of the Act shall not be applicable in relation to, …transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC.”
To exclude transactions traded through the power exchanges from the impact of new levy of TDS and TCS, due to practical implementation difficulties, PXIL had made representation to CBDT for exemption of power exchange transactions from the purview of these sections.
While talking about the announcement, Prabhajit Kumar Sarkar, Managing Director & CEO, Power Exchange India Ltd said, “We welcome the guidelines from the CBDT for considering our appeal and exempting the transactions traded through power exchanges from the applicability of the new TDS and TCS provision. This exemplifies the confidence reposed on exchange-traded power and PXIL by the government as an important market infrastructure for the development of power market.”