The income tax department has clarified the applicability of TDS liability of e-retailers trading through the government's open network digital commerce. 

As per the FAQ issued by the Central Board of Direct Taxes (CBDT) on Thursday, a 1 per cent TDS will have to be deducted from the gross sale amount after including convenience/packaging/shipping fees as charged by e-commerce trading platforms for the order placed on ONDC. 

As ONDC or Open Network for Digital Commerce is a new initiative of the Department for Promotion of Industry and Internal Trade (DPIIT), the CBDT had received representations seeking clarity on who should be liable for Tax Deducted at Source (TDS) compliance under I-T laws. 

Under the law, every e-commerce operator is required to deduct TDS at the rate of 1 per cent of the sales amount of goods/services sold through its platform. 

The CBDT has clarified that in a situation where multiple e-commerce operators (ECOs) are involved in a single transaction through the ECO platform, the TDS compliance is to be done by the supplier side, who finally releases the payment to the supplier. 

Incorporated on December 31, 2021, ONDC is a Section 8 company. 

It is an initiative of the DPIIT to create a facilitative model to help small retailers take advantage of digital commerce. It is not an application, platform, intermediary, or software but a set of specifications designed to foster open, unbundled, and interoperable open networks.