Power trading transactions exempted from new TDS and TCS

The Central Board of Direct Taxes of India (CBDT) has exempted power trading transactions   through online exchanges from the newly imposed section 194 (O) – TDS on E-Commerce Transactions & section 206C (1H) – TCS on Sale of Goods on e-commerce platform, of 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.50 lakh under TDS and TCS, respectively, with effect from October 1, 2020.

However, it was observed that there were practical difficulties in implementation of these taxes in case of power exchanges, like securities and commodities transactions traded through recognised stock and commodities exchanges or cleared and settled through recognised clearing corporations.

The CBDT vide Circular No 17 of 2020 Ref No F. No.370133/22/2020-TPL dated September 29, 2020, has now clarified that transactions on power exchanges are exempt from the purview of Section 194 O & Section 206 C(1H) of the act.

The CBDT Circular inter alia mentions:

Section 4.1.2: 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:

“(ii) transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC; and…”

Responding to the announcement, Prabhajit Kumar Sarkar, Managing Director & Chief Executive Officer, 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.”

In order to exclude transactions traded through the power exchanges from the impact of new levy of TDS and TCS, due to practical implementation difficulties, Power Exchange India Ltd (PXIL), in a release said that it had made representation to the Central Board of Direct Taxes (CBDT) for exemption of power exchange transactions from the purview of these sections.

Note: TDS = Tax Deducted at Source; TCS = Tax Collected at Source

Featured photograph, sourced from POSOCO, is for illustration only