Amended Provisions of Equalisation Levy

 Scope of Equalisation Levy Extended

The Finance Act, 2016 introduced Equalisation Levy with effect from 01-06-2016. This levy is charged at the rate of 6% from the consideration paid or payable to a nonresident person for the online advertisement services.

The Finance Bill, 2020, as passed by the Lok Sabha, has extended the scope of Equalisation Levy to cover within its scope the consideration received or receivable for e-commerce supply or services made or facilitated by an e-commerce operator.

With effect from 01-04-2020, there will two transactions in respect of which equalisation levy shall be charged, namely

1. Sum received or receivable by a non-resident for the online advertisement services rendered to a specified persons. [Section 165 of the Finance Act, 2016]

2. Sum received or receivable by an e-commerce operator from e-commerce supply of goods or services to specified persons. [Section 165A(1) of the Finance Act, 2016]

When equalisation levy shall be charged?

As per the Finance Bill, 2020 as passed by the Lok Sabha, the equalisation levy shall be charged at the rate of 2% from the consideration received or receivable by an e-commerce operator from e-commerce supply of goods or services made or provided or facilitated by it to the following persons:

1. A person who is resident in India;

2. A person who buys such goods or services or both using internet protocol address located in India;

3. A non-resident person in the following circumstances: [Section 165A(3) of the Finance Act, 2016]

• Sale of advertisement which targets a customer who is resident in India or a customer who accesses the advertisement through internet protocol address located in India; and
• Sale of data collected from a person who is resident in India or from a person who uses internet protocol address located in India

When equalisation levy shall not be charged?

As per Section 165A(2) of the Finance Act, 2016, the equalisation levy shall not be charged in the following three circumstances:

1. where the equalisation levy is leviable under section 165

2. 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. 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

Meaning of e-commerce operator

As per Section 164 of the Finance Act, 2016 “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.

Meaning of e-commerce supply or services

As per Section 164 of the Finance Act, 2016 “e-commerce supply or services” means-

• online sale of goods owned by the e-commerce operator; or
• online provision of services provided by the e-commerce operator; or
• online sale of goods or provision of services or both, facilitated by the e-commerce operator; or
• any combination of activities listed in clause (i), (ii) or clause (iii)

Who is liable to pay equalisation levy?

As per Section 166A of the Finance Act, 2016 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:

Statement of equalisation levy

As per Section 167(1) of the Finance Act, 2016 every e-commerce operator shall prepare and deliver or cause to deliver a statement of equalisation levy on or before 30th June of the financial year immediately following the financial year in which equalisation levy is chargeable.

As per Section 167(2) of the Finance Act, 2016 every 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.

Consequences of late payment

• Interest

As per Section 170 of the Finance Act, 2016 an e-commerce operator who fails to deposit the equalisation levy to the credit of central government by due date shall be liable for payment of simple interest at the rate of 1% of such levy for every month or part of the month during which such failure continues.

• Penalty

As per Section 171 of the Finance Act, 2016 any e-commerce operator who fails to pay the whole or any part of the equalisation levy as required under section 166A 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 pay.

Penalty for failure to furnish statement

As per Section 172 of the Finance Act, 2016 where an e-commerce operator fails to furnish the statement within the time prescribed under sub-section (1) 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

As per Section 173 of the Finance Act, 2016 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 proves to the satisfaction of the Assessing Officer that there was reasonable cause for the said failure.