Over the last few years, Information Technology has been taken as new exponential measure in India and globally for the new models of business, which has increased in the demand of digital services. In the current scenario, we have big reliance on internet for the e-business. As a result, new business models have created new challenges in the chapter of income tax. As the physical presence of these business models are not available in the existing tax acts, so government has introduced the equalisation levy to give effect to one of the recommendations of the BEPS (Base Erosion and Profit Shifting) Action Plan. Here we have discussed and answered the questions in easy understandable format, so as to provide the basic understanding of the concept.
Ans: Equalisation Levy was introduced in 2016 with intention of taxing the digital transaction i.e. income accruing to e-commerce company from India.
Ans: It is applicable when,
(i) RESIDENT (Service Receiver) paying consideration to NON-RESIDENT (Service Provider)
(ii) NON-RESIDENT (Service Receiver) (having permanent establishment in India) paying consideration to NON-RESIDENT (Service Provider)
Ans: 6% on the gross amount charged.
Ans: Every resident person and non-resident (having a permanent establishment in India) is required to withhold Equalisation Levy while making payment to a non-resident service provider.
The concept of chargeability shall be based on grossing up the amount. Suppose, service has been taken for a consideration of Rs.150000. the amount of Equalisation levy shall be calculated by grossing up of 6% in Rs.150000, which is (150000*.06)/1.06 = 8490. So Service receiver in India shall make a payment of Rs.150000-8490= Rs.141510.
Ans: The amount deducted should be paid to government, same like TDS, i.e. 7th of next month by challan no.285.
Ans: Service recipient is required to make compliance and also file an annual statement in respect of services received in form no. 1 on or before 30th June of financial year ended, in which details are required for non-resident person also.
Ans: The consequences of each default are mentioned below;
|Sr. No.||Date||Bill No.||Party Name||Address||Pan (if applicable)||Payment||Mode of Payment||Details of Payment|
|Amount ($)||Amount (₹)|