The Finance Act, 2024 introduces changes to the Equalisation Levy provisions. Effective August 1, 2024, the 2% levy on e-commerce transactions will no longer apply, addressing concerns about its scope and compliance burden. The levy will be exempt for transactions occurring after this date, with adjustments made for income from April 2020 to July 2024. The amendments aim to streamline tax obligations for e-commerce operators and clarify the applicability of the levy.
Budget 2024: Amendment of provisions related to Equalisation Levy
Chapter VIII of the Finance Act, 2016 related to equalisation levy was amended by Finance Act, 2020 to provide for imposition of equalization levy (EL) of two per cent on the amount of consideration received/ receivable by an e-commerce operator from e-commerce supply or services. An “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. The levy is imposed on the amount of consideration received or receivable from–
(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 the above-mentioned activities.
2. However, the levy is not applicable where the e-commerce operator has a permanent establishment (PE) in India, and the e-commerce supplies or services are effectively connected with such PE. The levy is applicable on consideration received or receivable by the e-commerce operator from e-commerce supply or services made or provided or facilitated by it–
(i) to a person resident in India;
(ii) to a non-resident from–
(a) sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement through an IP address located in India; and
(b) sale of data, collected from a person who is resident in India or from a person who uses an IP address located in India; and
(iii) to a person who buys goods or services, or both, using an IP address located in India.
3. Some stakeholders have raised concerns that the scope of 2% equalisation levy is ambiguous and as a result it leads to compliance burden. In view of this it is proposed that this equalisation levy at the rate of 2% shall not be applicable to consideration received or receivable for e-commerce supply or services, on or after the 1st day of August, 2024. Any service which was liable to equalisation levy was exempt in sub-section (50) of section 10 subject to certain conditions. Consequently as the 2% levy is being made inapplicable, it is proposed that income arising from e-commerce supply or services made or provided or facilitated on or after the 1st day of April, 2020 but before the 1st day of August, 2024 only, shall fall in the ambit of clause (50) of section 10 of the Act.
These amendments will take effect from the 1st day of August, 2024.
[Clauses 4 & 157]
Extract of Clauses 4 of Finance Bill 2024
Clause 4 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.
Clause (50) of the said section provides exemption to 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.
It is also proposed to amend the said clause so as to exempt the income arising from any e-commerce supply or services made or provided or facilitated on or after the 1st day of April, 2020 till the 1st day of August, 2024.
This amendment will take effect retrospectively from 1st August, 2024.
Extract of Clauses 157 of Finance Bill 2024
Clause 157 of the Bill seeks to amend the Finance Act, 2016.
Section 163 of the said Act provides the extent, commencement and application of Chapter VIII of the said Act. Sub-section (3) of the said section provides that the said Chapter 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.
It is proposed to amend the said sub-section to provide that the said Chapter shall also apply 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 but before the 1st day of August, 2024.
Section 165A of the said Act provides for charge of equalisation levy on e-commerce supply of services.
It is proposed to insert sub-section (4) to the said section to provide that the provisions of the said section shall not apply to any consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it on or after the 1st day of August, 2024.
These amendments will take effect retrospectively from 1st August, 2024.
4. Amendment of section 10.
In section 10 of the Income-tax Act,–
(e) in clause (50), for the portion beginning with the words “any income arising from” and ending with the words “under that Chapter”, the following shall be substituted and shall be deemed to have been substituted with effect from the 1st day of August, 2024, namely:–
“any income arising from any–
(i) specified service provided on or after the date on which the provisions of Chapter VIII of the Finance Act, 2016 comes into force; or 28 of 2016.
(ii) e-commerce supply or services made or provided or facilitated on or after the 1st day of April, 2020 but before the 1st day of August, 2024,
and chargeable to equalisation levy under that Chapter.”.
