The Digital Space has grown very rapidly in the past few years and is expected to grow substantially in the next few years. The biggest beneficiaries of this rapid growth in the Digital Space are companies earning through Digital Ads like Google, Facebook, Twitter, Linkedin, Yahoo and other advertising majors. As these companies are located outside India, they are not even subject to any taxes in India. Business in the Digital Domain is done irrespective of the physical location of the service provider/recipient and is being done in the nebulous world of cyberspace. Persons carrying business in digital domain could be located anywhere in the world. These new business models have created new tax challenges. The digital business fundamentally challenges the current manner of levy of taxes which are based on the presence-based permanent establishment rules.
Reason for Introduction of Equalisation Levy
Many companies which are
providing services in the cyberspace register themselves in a country wherein
the tax rates are low and pay very low taxes on their global income.
In a recent case held in
the UK – it was held that by registering itself in Dublin instead of UK, Google
was paying negligible amount of tax. Google lost the case and had to pay $ 185
Milllion in taxes to the UK Govt.
If we talk about India –
The revenue of Google was Rs. 4108 Crore in 2014-15 and the revenue of Facebook
was Rs. 123.5 Crores during the same period.
Hence, introduction of
Equalisation Levy would fetch the govt a lot of money which till now was not
taxed. that’s why Many people are also referring to this Equalisation Levy as
Google Tax because a major chunk of online ads spent goes to Google.
Revenue from
Equalisation levy collection stood at :
Rs 338.6 crore in
2016-17,
Rs 589.4 crore in
2017-18
Rs 938.9 crore in 2018-19.
Rs 1,136.5 crore in
2019-20 and
Rs 1,492.7 crore in
2020-21 (up to January 30, 2021).
The said figure of
Fiscal year 2021 ended up at Rs. 2057 Crore i.e., approx. 564 crores was
collected in last two months only.
Taking a cue from the G20 / OECD
Base Erosion and Profit Shifting (BEPS) Action 1 dealing with digital economy,
India introduced an equalisation levy in 2016. The Finance Act, 2016 introduced Equalisation
Levy with effect from 01.06.2016 to levy ‘Equalisation Levy’ at the rate
of 6% from the consideration paid or payable to a non-resident person for the
online advertisement services. Broadly speaking, the equalisation levy
at the rate of 6 percent was on non-resident companies engaged in online
advertisement and related activities.
The scope of the said provisions
has now been expanded to include equalisation levy of 2 percent on
consideration received or receivable by an ‘e-commerce operator’ from
‘e-commerce supply or services’, and is effective from 01.04.2020.
Not a levy under the Indian Income tax law
The Equalisation Levy is imposed under the Finance Act, 2016 and not as
a part of the Indian Income Tax Act, 1961. Most of the tax treaties entered
into by India cover Income tax, applicable surcharges or other substantially
similar taxes. As a result, a claim for credit of the Equalisation Levy against
a tax liability in the country of residence may not be available, giving rise
to double taxation and an increase in the overall tax cost for the e-commerce
operators.
CHAPTER VIII OF THE FINANCE
ACT, 2016
EQUALISATION LEVY
[as amended by the Finance Act,
2020 (12 of 2020)]
Extent, commencement and
application.
163. (1) This Chapter extends to the whole of India except the State
of Jammu and Kashmir.
(2) It shall come into force on
such date as the Central Government may, by notification in the Official
Gazette, appoint.
(3) It shall apply to
consideration received or receivable for specified services provided on or
after the commencement of this Chapter, and to consideration received or receivable for e-commerce
supply or services made or provided or facilitated on or after the 1st day of
April, 2020.
164 . In this Chapter, unless the context otherwise requires,—
|
(a) |
"Appellate
Tribunal" means the Appellate Tribunal constituted under section 252 of
the Income-tax Act; |
|
|
(b) |
"Assessing Officer"
means the Income-tax Officer or Assistant Commissioner of Income-tax or
Deputy Commissioner of Income-tax or Joint Commissioner of Income-tax or
Additional Commissioner of Income-tax who is authorised by the Board to
exercise or perform all or any of the powers and functions conferred on, or
assigned to, an Assessing Officer under this Chapter; |
|
|
(c) |
"Board" means the
Central Board of Direct Taxes constituted under the Central Boards of Revenue
Act, 1963 (54 of 1963); |
|
|
(ca) |
"e-commerce
operator" means a non-resident who owns, operates or manages digital or
electronic facility or platform for online sale of goods or online provision
of services or both; |
|
|
(cb) |
"e-commerce supply or services"
means— (i) online sale of goods
owned by the e-commerce operator; or (ii) online provision of
services provided by the e-commerce operator; or (iii) online sale of goods or
provision of services or both, facilitated by the e-commerce operator; or (iv) any combination of
activities listed in clause (i), (ii) or clause (iii); |
|
|
(d) |
"equalisation levy"
means the tax leviable on consideration received or receivable for any
specified service or
e-commerce supply or services under
the provisions of this Chapter; |
|
|
(e) |
"Income-tax Act"
means the Income-tax Act, 1961 (43 of 1961); |
|
|
(f) |
"online" means a
facility or service or right or benefit or access that is obtained through
the internet or any other form of digital or telecommunication network; |
|
|
(g) |
"permanent
establishment" includes a fixed place of business through which the
business of the enterprise is wholly or partly carried on; |
|
|
(h) |
"prescribed" means
prescribed by rules made under this Chapter; |
|
|
(i) |
"specified service"
means online advertisement, any provision for digital advertising space or
any other facility or service for the purpose of online advertisement and
includes any other service as may be notified by the Central Government in
this behalf; |
|
|
(j) |
words and expressions used
but not defined in this Chapter and defined in the Income-tax Act, or the
rules made thereunder, shall have the meanings respectively assigned to them
in that Act. |
165 . (1) On and from the date of commencement of this Chapter, there
shall be charged an equalisation levy at the rate of six per cent of the amount
of consideration for any specified service received or receivable by a person,
being a non-resident from—
|
(i) |
a person resident in India
and carrying on business or profession; or |
|
|
(ii) |
a non-resident having a
permanent establishment in India. |
(2) The equalisation levy under
sub-section (1) shall not be charged, where—
|
(a) |
the non-resident providing
the specified service has a permanent establishment in India and the
specified service is effectively connected with such permanent establishment; |
|
|
(b) |
the aggregate amount of
consideration for specified service received or receivable in a previous year
by the non-resident from a person resident in India and carrying on business
or profession, or from a non-resident having a permanent establishment in
India, does not exceed one lakh rupees; or |
|
|
(c) |
where the payment for the
specified service by the person resident in India, or the permanent
establishment in India is not for the purposes of carrying out business
or profession. |
Charge of equalisation levy on
e-commerce supply of services.
165A. (1) On and from the 1st
day of Apirl, 2020, there shall be charged an equalisation levy at the rate of
two per cent. of the amount of consideration received or receivable by an
e-commerce operator from e-commerce supply or services made or provided or
facilitated by it—
(i) to a person resident in
India; or
(ii) to a non-resident in the
specified circumstances as referred to in sub-section (3); or
(iii) to a person who buys such
goods or services or both using internet protocol address located in India.
(2) The equalisation levy under
sub-section (1) shall not be charged—
(i) where the e-commerce
operator making or providing or facilitating e-commerce supply or services has
a permanent establishment in India and such e-commerce supply or services is
effectively connected with such permanent establishment;
(ii) where the equalisation
levy is leviable under section 165; or
(iii) sales, turnover or gross
receipts, as the case may be, of the e-commerce operator from the e-commerce
supply or services made or provided or facilitated as referred to in
sub-section (1) is less than two crore rupees during the previous year.
(3) For the purposes of this
section, "specified circumstances" mean—
(i) sale of advertisement,
which targets a customer, who is resident in India or a customer who accesses
the advertisement though internet protocol address located in India; and
(ii) sale of data, collected
from a person who is resident in India or from a person who uses internet
protocol address located in India.
Collection and recovery of equalisation levy on specified services.
166 . (1) Every person, being a resident and carrying on business or
profession or a non-resident having a permanent establishment in India (here in
this Chapter referred to as assessee) shall deduct the equalisation levy referred to in sub-section (1) of section 165 from the amount paid or payable to a non-resident in respect
of the specified service at the rate specified in section 165, if the aggregate
amount of consideration for specified service in a previous year exceeds one
lakh rupees.
(2) The equalisation levy so
deducted during any calendar month in accordance with the provisions of
sub-section (1) shall be paid by every assessee to the credit of the Central
Government by the seventh day of the month immediately following the said
calendar month.
(3) Any assessee who fails to
deduct the levy in accordance with the provisions of sub-section (1) shall,
notwithstanding such failure, be liable to pay the levy to the credit of the
Central Government in accordance with the provisions of sub-section (2).
Collection and recovery of
equalisation levy on ecommerce supply or services.
"166A. The equalisation
levy referred to in sub-section (1) of section 165A, shall be paid by every
e-commerce operator to the credit of the Central Government for the quarter of
the financial year ending with the date specified in column (2) of the Table
below by the due date specified in the corresponding entry in column (3) of the
said Table:
|
Serial Number |
Date of ending of the quarter
of financial year |
Due date of the financial
year |
|
(1) |
(2) |
(3) |
|
1. |
30th June |
7th July |
|
2. |
30th September |
7th October |
|
3. |
31st December |
7th January |
|
4. |
31st March |
31st March |
Furnishing of statement.
167 . (1) Every assessee or e-commerce operator shall, within the prescribed time after the end of each
financial year, prepare and deliver or cause to be delivered to the Assessing
Officer or to any other authority or agency authorised by the Board in this
behalf, a statement in such form, verified in such manner and setting forth
such particulars as may be prescribed, in respect of all specified
services or e-commerce supply or
services, as the case may be, during
such financial year.
(2) An assessee or e-commerce operator who has not furnished the statement within the time prescribed
under sub-section (1) or having furnished a statement under sub-section (1),
notices any omission or wrong particular therein, may furnish a statement or a
revised statement, as the case may be, at any time before the expiry of two
years from the end of the financial year in which the specified service was
provided or e-commerce supply or
services was made or provided or facilitated.
(3) Where any assessee or e-commerce operator fails to furnish the statement under sub-section (1) within
the prescribed time, the Assessing Officer may serve a notice upon such
assessee or e-commerce operator requiring him to furnish the statement in the prescribed
form, verified in the prescribed manner and setting forth such particulars, within
such time, as may be prescribed.
Processing of statement.
168. (1) Where a statement has been made under section 167 by the
assessee or e-commerce operator, such statement shall be processed in the following manner,
namely:—
|
(a) |
the equalisation levy shall
be computed after making the adjustment for any arithmetical error in the
statement; |
|
|
(b) |
the interest, if any shall be
computed on the basis of sum deductible or payable, as the case may be, as computed in the statement; |
|
|
(c) |
the sum payable by, or the
amount of refund due to, the assessee shall be determined after adjustment of
the amount computed under clause (b) against any amount paid under
sub-section (2) of section 166 or section 166A or
section 170 and any amount paid otherwise by way of tax or interest; |
|
|
(d) |
an intimation shall be
prepared or generated and sent to the assessee specifying the sum determined
to be payable by, or the amount of refund due to, him under clause (c); and |
|
|
(e) |
the amount of refund due to
the assessee in pursuance of the determination under clause (c) shall be
granted to him: |
Provided that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the statement or revised statement is furnished.
(2) For the purposes of
processing of statements under sub-section (1), the Board may make a scheme for
centralised processing of such statements to expeditiously determine the tax
payable by, or the refund due to, the assessee or e-commerce operator as required under that sub-section.
Rectification of mistake.
169. (1) With a view to rectifying any mistake apparent from the
record, the Assessing Officer may amend any intimation issued under section
168, within one year from the end of the financial year in which the intimation
sought to be amended was issued.
(2) The Assessing Officer may
make an amendment to any intimation under sub-section (1), either suo
motu or on any mistake brought to his notice by the assessee or e-commerce operator.
(3) An amendment to any
intimation, which has the effect of increasing the liability of the
assessee or e-commerce operator or reducing a refund, shall not be made under this section
unless the Assessing Officer has given notice to the assessee or e-commerce operator of his intention so to do and has given the assessee or e-commerce operator a reasonable opportunity of being heard.
(4) Where any such amendment to
any intimation has the effect of enhancing the sum payable or reducing the
refund already made, the Assessing Officer shall make an order
specifying the sum payable by the assessee or e-commerce operator and the provisions of this Chapter shall apply accordingly.
Interest on delayed payment of equalisation levy.
170. Every assessee or e-commerce operator, who fails to credit the equalisation levy or any part thereof as
required under section 166 or section 166A to
the account of the Central Government within the period specified in that
section, shall pay simple interest at the rate of one per cent of such levy for
every month or part of a month by which such crediting of the tax or any part
thereof is delayed.
Penalty for failure to deduct or pay equalisation levy.
171. Any assessee or e-commerce operator who—
|
(a) |
fails to deduct the whole or
any part of the equalisation levy as required under section 166; or |
|
|
(aa) |
fails to pay the whole or any
part of the equalisation levy as required under section 166A; or |
|
|
(b) |
having deducted the
equalisation levy referred
to in sub-section (1) of section 165, fails to pay such levy to the credit of the Central Government
in accordance with the provisions of sub-section (2) of that section, |
|
|
shall be liable to pay,— |
|
(i) |
in the case referred to in
clause (a), in addition to paying the levy in accordance with the provisions
of sub-section (3) of that section, or interest, if any, in accordance with
the provisions of section 170, a penalty equal to the amount of equalisation
levy that he failed to deduct; and |
|
|
(ia) |
in the case referred to in
clause (aa), in addition to the levy in accordance with the provisions of
that section, or interest, if any, in accordance with the provisions of
section 170, a penalty equal to the amount of equalisation levy that he failed
to pay; and |
|
|
(ii) |
in the case referred to in
clause (b), in addition to paying the levy in accordance with the provisions
of sub-section (2) of that section and interest in accordance with the
provisions of section 170, a penalty of one thousand rupees for every day
during which the failure continues, so, however, that the penalty under this
clause shall not exceed the amount of equalisation levy that he failed to
pay. |
Penalty for failure to furnish statement.
172. Where an assessee or e-commerce operator fails to furnish the statement within the time prescribed
under sub-section (1) or sub-section (3) of section 167, he shall be liable to
pay a penalty of one hundred rupees for each day during which the failure
continues.
Penalty not to be imposed in certain cases.
173. (1) Notwithstanding anything contained in section 171 or section
172, no penalty shall be imposable for any failure referred to in the said
sections, if the assessee or
e-commerce operator proves to the satisfaction
of the Assessing Officer that there was reasonable cause for the said failure.
(2) No order imposing a penalty
under this Chapter shall be made unless the assessee or e-commerce operator has been given a reasonable opportunity of being heard.
Appeal to Commissioner of Income-tax (Appeals).
174 . (1) An assessee or e-commerce operator aggrieved by an order imposing penalty under this Chapter,
may appeal to the Commissioner of Income-tax (Appeals) within a period of
thirty days from the date of receipt of the order of the Assessing Officer.
(2) An appeal under sub-section
(1) shall be in such form and verified in such manner as may be prescribed and
shall be accompanied by a fee of one thousand rupees.
(3) Where an appeal has been
filed under sub-section (1), the provisions of sections 249 to 251 of the
Income-tax Act shall, as far as may be, apply to such appeal.
Appeal to Appellate Tribunal.
175. (1) An assessee or e-commerce operator aggrieved by an order made by the Commissioner of Income-tax
(Appeals) under section 174 may appeal to the Appellate Tribunal against such
order.
(2) The Commissioner of
Income-tax may, if he objects to any order passed by the Commissioner of
Income-tax (Appeals) under section 174, direct the Assessing Officer to appeal
to the Appellate Tribunal against such order.
(3) An appeal under sub-section
(1) or sub-section (2) shall be filed within sixty days from the date on which
the order sought to be appealed against is received by the assessee or e-commerce operator or by the Commissioner of Income-tax, as the case may be.
(4) An appeal under sub-section
(1) or sub-section (2) shall be in such form and verified in such manner as may
be prescribed and, in the case of an appeal filed under sub-section (1), it
shall be accompanied by a fee of one thousand rupees.
(5) Where an appeal has been
filed before the Appellate Tribunal under sub-section (1) or sub-section (2),
the provisions of sections 253 to 255 of the Income-tax Act shall, as far as
may be, apply to such appeal.
Punishment for false statement.
176. (1) If a person makes a false statement in any verification
under this Chapter or any rule made thereunder, or delivers an account or
statement, which is false, and which he either knows or believes to be false,
or does not believe to be true, he shall be punishable with imprisonment for a
term which may extend to three years and with fine.
(2) Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of 1974), an offence
punishable under sub-section (1) shall be deemed to be non-cognizable within
the meaning of that Code.
Institution of prosecution.
177. No prosecution shall be instituted against any person for
any offence under section 176 except with the previous sanction of the Chief
Commissioner of Income-tax.
Application of certain provisions of Income-tax Act.
178. The provisions of sections 119, 120, 131, 133A, 138, 156,
Chapter XV and sections 220 to 227, 229, 232, 260A, 261, 262, 265 to 269, 278B,
280A, 280B, 280C, 280D, 282 and 288 to 293 of the Income-tax Act shall so far
as may be, apply in relation to equalisation levy, as they apply in relation to
income-tax.
Power to make rules.
179. (1) The Central Government may, by notification in the
Official Gazette, make rules for carrying out the provisions of this Chapter.
(2) In particular, and without
prejudice to the generality of the foregoing power, such rules may provide for
all or any of the following matters, namely:—
|
(a) |
the time within which and the
form and the manner in which the statement shall be delivered or caused to be
delivered or furnished under section 167; |
|
|
(b) |
the form in which an appeal
may be filed and the manner in which it may be verified under sections 174
and 175; |
|
|
(c) |
any other matter which is to
be, or may be, prescribed. |
(3) Every rule made under this
Chapter shall be laid, as soon as may be after it is made, before each House of
Parliament, while it is in session, for a total period of thirty days which may
be comprised in one session or in two or more successive sessions, and if, before
the expiry of the session immediately following the session or the successive
sessions aforesaid, both Houses agree in making any modification in the rule or
both Houses agree that the rule should not be made, the rule shall thereafter
have effect only in such modified form or be of no effect, as the case may be;
so, however, that any such modification or annulment shall be without prejudice
to the validity of anything previously done under that rule.
Power to remove difficulties.
180 . (1) If any difficulty arises in giving effect to the provisions
of this Chapter, the Central Government may, by order published in the Official
Gazette, not inconsistent with the provisions of this Chapter, remove the
difficulty:
Provided that no such order shall be made after the expiry of a period of two years from the date on which the
provisions of this Chapter come into force 31st day of March, 2022.
(2) Every order made under this
section shall be laid, as soon as may be after it is made, before each House of
Parliament.
Equalisation Levy @ 6% on Digital Ads
Many Internet Companies
are generating massive revenues from India. However, as they do not have a
permanent establishment in India – they are not liable to pay to any income tax
in India. The Finance Act, 2016 has put an end to this free run for such
internet companies and has introduced an “equalization levy” @ 6% on specified
services which are availed by Indian Residents from Non Resident providers. With the introduction of the
Equalisation Levy, the Govt has been indirectly able to tax the Global
Advertising Companies. More such services may be added in the list of specified
services in future. Currently this Equalisation Levy would only be on
Advertisements.
Transactions Taxable under
Income-Tax
The amended section 163 of
the Finance Act, 2016, clarifies that consideration received or receivable for
specified services shall not include the considerations, which are taxable as
royalty or fees for technical services in India
Manner of Deduction of Equalisation Levy
Levy
of equalization would be in the same manner as TDS, like the person making the
payment for advertisement will require to deduct Equalisation levy @ 6% on the
total amount of consideration and deposit the same to the account of Central
Govt.
Applicability of Equalisation Levy
Equalisation Levy is a
direct tax, which is withheld at the time of payment by the service recipient. The
two conditions to be met to be liable to equalisation levy:
(i)
The payment should be
made to a non-resident service provider;
(ii)
The annual payment made
to one non-resident
service
provider exceeds Rs. 1,00,000 in one financial year.
It shall be charged (equalisation
levy) at the rate of six per cent of the amount of consideration for any
specified service received or receivable by a person, being a non-resident from
-
(i) a
person resident in India and carrying on business or profession; or
(ii) a
non-resident having a permanent establishment in India.
Services
covered under Equalisation Levy
Currently,
not all services are covered under the ambit of equalisation Levy. The
following services covered:
(i)
Online
advertisement
(ii)
Any
provision for digital advertising space or facilities/ service for the purpose
of online advertisement
Annual Return of Equalisation Levy
An Annual Return is required
to be filed with the Govt stating the Equalisation Levy withheld and the
organisations to which the payment has been made. This return is required to be
filed annually and is to be filed in Form
No. 1 on or before 30th June of the next financial year . This annual
return is to be verified either through Digital Signature or through an
Electronic Verification Code by an authorised signatory.
Exceptions where Equalisation levy shall not be charged
Equalisation levy shall not be charged, where -
(a) the
non-resident providing the specified service has a permanent establishment in
India and the specified service is effectively connected with such permanent
establishment;
(b) the
aggregate amount of consideration for specified service received or receivable
in a previous year by the non-resident from a person resident in India and
carrying on business or profession, or from a non-resident having a permanent
establishment in India, does not exceed Rs. 1,00,000; or
(c) where the
payment for the specified service by the person resident in India, or the
permanent establishment in India is not for the purposes of carrying out
business or profession.
India introduced ‘Equalisation Levy 2.0’ (EL 2.0) vide Finance Act, 2020
Finance
Act 2020 expanded the scope of equalization levy ('EL') to provide that with
effect from 01.04.2020, EL shall be
levied @ 2% (‘EL 2.0’) on consideration received or receivable for e-commerce
supply or services made or provided or facilitated by e-commerce operator. The
said amendment casts responsibility of collection and payment with
seller/service provider which was earlier confined to service recipient in the
form of deduction on specified services.
Indian Equalisation Levy 2.0
The Equalisation Levy introduced by the Finance Act 2016, was charged at
6% on certain online advertising and related services. The Finance Act 2020
amended the Finance Act 2016, introducing a new Equalisation Levy at 2% on
the consideration received/receivable by an e-commerce operator from the
following transactions (e-commerce supply or services):
·
Online sale of goods owned
by the e-commerce operator; or
·
Online provision of
services provided by the e-commerce; or
·
Online sale of goods or
provision of services or both, facilitated by the e-commerce operator; or
·
Any combination of the
above-mentioned activities
The levy is applicable on consideration received by the e-commerce
operator on the above transactions from a:
·
Person resident in India
·
Non-resident, where the:
(i)
Sale of advertising, which
targets a customer who is resident in India, or a customer who accesses the
advertising though an IP address located in India; and
(ii)
Sale of data, collected
from a person who is resident in India or from a person who uses an IP address
located in India
(iii)
Person who buys goods or
services, or both, uses an IP address located in India.
Thus, the levy captures online sales of any goods
or provision of any services by or through a non-resident e-commerce operator.
NOTE
·
Equalisation levy @6% for
Advertisement services (Google, Facebook,
Twitter), and
·
Equalisation levy @2% for
e-commerce transactions (Amazon, Flipkart)
Impact Equalisation Levy
2.0
Consideration subject to the Equalisation Levy has
been exempted from Indian Income tax and thus not subject to tax withholding.
Further, no credit is available for the Equalisation Levy against the Income
tax liability in India.
The turnover/gross receipt threshold would take into account sales made
to Indian customers through the e-commerce platform operated by a non-resident
(not just by the non-resident e-commerce operator).
Onus of compliance cast on the non-resident
e-commerce operator
Unlike the earlier Equalisation Levy which required
the levy to be deducted by the service recipient, the new levy EL 2.0 is to be collected by the
e-commerce operator. The e-commerce operator is required to deposit the levy to
the credit of the Indian treasury on a quarterly basis:
(i)
Applicability
EL 2.0 is applicable on consideration received or receivable on
the online sale of goods or online provision of services or a combination of
both by the non-resident e-commerce operator. EL 2.0 is applicable where
non-resident e-commerce operators supply to
(a) person resident in India
(b) Person using an Indian IP address
(c) Non-resident in specific cases.
Examples of specific cases where supply to a
non-resident is subject to equalization levy are
(a) sale of advertisement to non-resident and such
advertisement target Indian Resident
(b) sale of data to non-resident and the data targets
Indian residents.
(ii)
Person responsible for paying equalisation levy 2.0 in India
Non-resident e-commerce operator
(iii)
Definition of ‘e-commerce operator’
E-commerce operator is defined to mean a
non-resident who owns, operates or manages digital or electronic facility or
platform for online sale of goods or online provision of services, or both.
(iv)
Definition of e-commerce supply or services (i.e. specified services on
which equalisation levy applies)
Equalization Levy 2.0 applies to the
following specified E-Commerce supplies or services
• Online sale of goods owned by the
e-commerce operator;
• Online provision of services provided
by the e-commerce operator;
• Online sale of goods or provision of
services or both, facilitated by the e-commerce operator;
• Any combination of above activities
• Sale of advertisement which targets an
Indian resident customer, or which targets a customer who accesses the
advertisement through an IP address located in India
• Sale of data collected from an Indian
resident or from a person who uses an IP address located in India
(v)
Service recipient
• Any person resident in India;
• Any person who buys goods or services
(or both) using an IP address located in India;
• Any non-resident in respect of offshore sale of advertisements
which target Indian customers; • Any non-resident to whom data is sold which is
collected from an Indian resident or from a
person who uses an IP address located in India
(vi)
Rate of Equalisation levy 2.0
EL 2.0 is charged
at the rate of 2% on the amount of consideration received/receivable by the
non-resident (e-commerce operator)
(vii) Exceptions
where Equalisation levy 2.0 shall not be charged
The Equalisation Levy 2.0 does not apply in the
following cases:
(i)
E-commerce operator has a
Permanent Establishment in India and the e-commerce
supplies or services are
effectively connected with such Permanent Establishment
(ii)
Transactions covered by the
Equalisation Levy under Finance Act, 2016;
(iii)
Where sales, turnover or
gross receipts from e-commerce supplies or services is less
than Rs. 2 crores
i.e. INR 20 million (approx. USD 260,000), during the relevant tax year.
There
is no exception which provides that Equalisation levy will not be applicable in
cases where the income of the non-resident assessee is otherwise subject to tax
in India. Infact, an amendment under section 10(50) of the Income-tax Act provides
that income of non-resident which is subject to Equalisation levy would not be
chargeable to Income tax. Reading both the laws simultaneously, clealy there
seems to be an overlay i.e. the transactions which were already under the tax
net also appears to be now covered by Equalisation levy and ensuing lower rate
of taxation in India.
Text of Section 10(5)
(50) any income arising from any
specified service provided on or after the date on which the provisions of
Chapter VIII of the Finance Act, 2016 comes into force or arising from any
e-commerce supply or services made or provided or facilitated on or after the
1st day of April, 2020 and chargeable to equalisation levy under that Chapter.
Explanation 1. - For the removal of doubts it is hereby clarified that the income referred to in this clause shall not include and shall be deemed never to have been included any income which is chargeable to tax as royalty or fees for technical services in India under this Act read with the agreement notified by the Central Government under section 90 or section 90A.
Explanation 2. - For the purposes of this clause, -
(i) “e-commerce supply or services” shall have the meaning assigned to it in clause (cb) of section 164 of the Finance Act, 2016 (28 of 2016);
(ii) “specified service” shall have the meaning assigned to it in clause (i) of section 164 of the Finance Act, 2016 (28 of 2016).
The
Equalisation Levy which is to be deducted @ 6%/2% is required to be deposited
with the Govt. within 7 days from the end of the month in which this
amount has been deducted.
Through Challan No./ ITNS 285 is required to be deposited along with the Payment of Equalisation Levy. Equalisation Levy can be deposited online with the govt through the following link:-
https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
Filing of Statement of Equalisation Levy
Statement
of equalisation levy is to be furnished in Form 1 on or before 30th June of the
financial year immediately following the financial year in which Equalisation
Levy is chargeable. Verification can also be done online via use of Digital
Signature or Electronic Verification Code.
Correction to filed Statement
Any e-commerce operator who has not furnished
statement (Original/revised) by the due date, he can furnish such statement at
any time before the expiry of 2years from the end of the financial year in
which such e-commerce supply or services was made or facilitated.
1. Penalty for failure of payment
- Equalisation
Levy not deducted: Penalty equal to the amount of levy failed to be
deducted (along with interest at the rate of 1 per cent and
depositing of the principal levy outstanding).
- Equalisation
Levy deducted but not deposited: Penalty equal to Rs. 1,000/- day subject
to the maximum of the levy failed to be deducted (along with interest and
depositing of the principal levy outstanding).
- Disallowance
of such expenditure under
section 40(a)(ib) in the hands of the payer (unless the defect is
rectified).
2. Penalty for failure of filing statement
- Rs.
100/- day for each day the non-compliance continues.
3. Prosecution
- If a
false statement has been filed then the person may be subjected to
imprisonment of a term of up to 3 years and a fine.
Frequently
Asked Questions
Q.
- I am an individual and want to advertise online for personal purposes, do
provisions of equalisation levy apply to me as well ?
Ans.
: No provision of equalisation levy are applicable if the payments are made for
personal purpose.
Q.
- 2 have advertised on Facebook to promote my business of baking. I have to pay
Rs. 50,000 in FY 2021-22 to Facebook for the advertising services availed.
Equalisation levy is applicable to me?
Ans.
: No, since during the financial year your annual payments did not exceed
1,000,00 you are not liable to deduct equalisation levy.
Tax
withheld reduced by “equalization levy” (digital services tax) paid
The taxpayer (based in Singapore) was in the
business of providing “cloud services” in India. The Delhi High Court
recently held that an Indian entity making a payment to a foreign taxpayer was
permitted to withhold tax at the rate of 8% instead of 10% as provided under
the applicable tax treaty because the payment was already subject to the 2% “equalization
levy” (digital services tax). -[Google Asia Pacific (P) Ltd.
v. CIT (W.P.(C) 215/2022 (Del.)]
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