Several non resident e-Commerce operator has started, providing the service through digital media, without having physical presence in India. Because of which, India Tax department were not able to tax such transaction due to non-availability of PE in India. Government of India by Finance Act 2020, has introduced new provision 01.04.2020

What provision says, in brief?

Equalisation levy (EL) of 2% shall be charged on consideration received or receivable for E commerce supply or service by Non resident E commerce operator.

Who is liable to Discharge Equalisation levy (EL)?

E Commerce operator as defined in this section is liable to discharge liability of EL. Definition of “E Commerce Operator”(ECO) is given as below:-

“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;

From the above, it is clear that, To be called “E commerce operator” for this section, Following are pre-requisites:-

1) Service provider should be Non resident as per Income Tax Act

2) Service should own or manages online platform for Sale of goods or Service or Both

Note-This section is applicable for only Non residents(NR) and there is no differentiation between Goods or service

What are the transaction covered her?

Meaning “E Commerce supply or Service” is given as follows:-

“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);’

From above, it is evident that, Following are the transactions covered by this sections:-

1) Sale of Goods or Provision of Service by ECO, on his own account

2) Facilitation of sale of Goods /services, on sold by others

Note-Both Direct and indirect Sale of goods or provision of services. Providing facility of online platform for sale of goods /service is subject to EL

Nature of Transaction Service Receiver Service Provide
1) Sale of Goods/ Service Resident (irrespective of location of IP) or Person using IP address located in India Non Resident ECO
2) Facilitation of Sale of goods /Service Resident (irrespective of location of IP) or Person using IP address located in India Non Resident ECO
3) Sale of Advertisement, targeting Residents Non resident Non Resident ECO
4) Sale of Data collected from Resident Non resident Non Resident ECO

Incidence of Tax on ECO?

Tax shall be charged on gross consideration received or receivable for transaction referred in Column(1) from the Person referred in Column(2) of the above table

Mechanism of Tax Payment

ECO is liable to pay tax on above mentioned transaction.

It covers not only B2B(business to business) but also B2C(business to consumer) transactions.

Time Limit for payment of Equalisation levy

Date of ending of the financial year Due date of the quarter of financial Year
1. 30th June 7th July
2. 30th September 7th October
3. 31st December 7th January
4. 31st March 31st March

Non Applicability of the above provision related to Equalisation levy

1) ECO has Permanent establishment (PE) in India and Provision of supply or service is effectively connected with PE or

2) Online Marketing or digital marketing service or

3) Gross receipt/Sale is less than INR 2 Crores in the Financial year

Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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February 2024