Power Trading in Power Exchanges Exempted From new TDS and TCS

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 percent and 0.1 percent 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 the 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…”

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 Limited (PXIL) had made representation to the Central Board of Direct Taxes (CBDT) for the exemption of power exchange transactions from the purview of these sections.

While talking about the announcement, Prabhajit Kumar Sarkar, Managing Director and Chief Executive Officer, Power Exchange India Limited (PXIL) said, “we welcome the guidelines from the CBDT for considering our appeal and exempting the transactions trading 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 the power market.”

PXIL is promoted by NSE (National Stock Exchange of India Ltd.) & NCDEX (National Commodity and Derivatives Exchange). PXIL’s other shareholders are Power Finance Corporation from the Central Sector, Gujarat UVNL, Madhya Pradesh PMCL and West Bengal SEDCL from the State Sector, and TPTCL, GMRETL and JSWPTC from the Private Sector.