Power trading in Power Exchanges exempted from new TDS and TCS

Power trading in Power Exchanges exempted from new TDS and TCS under sections 194 (0) and 206 C (1H) of Income Tax Act respectively.

Power Trading
Pic by Foundry on pixabay

The Central Board of Direct Taxes of India (CBDT) has exempted power trading transactions through online exchanges like Power Exchange India Ltd (PXIL) from the newly imposed section 194 (O) – TDS on E-Commerce Transactions & section 206C (1H) – TCS on Sale of Goods on an E-Commerce platform, of Income-tax Act, 1961. 

The Finance Act 2020, had imposed a levy of 1% and O.1 % on all e-commerce transactions above Rs 50 lakhs 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 the recognised stock and commodities exchanges or cleared and settled through recognised clearing corporations.

The CBDT Circular inter alia mentions: 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 as per 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, Energy-saving India Limited (PXIL) had made representation to the Central Board of Direct Taxes (CBDT) for exemption of power exchange transactions from the purview of these sections.

Prabhajit Kumar Sarkar, Managing Director and Chief Executive Officer, Power Exchange India Limited 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.”

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