Difference Between Equalisation Levy (El) on Specified Services and on E-commerce Supply of services

The Finance Act 2020 has now been amended to impose an Equalisation Levy of 2% on consideration received by ‘e-commerce operator’ for e-commerce supply of goods or service. While the levy was initially imposed on B2B transactions, the present amendment attempts to cover even B2C transactions in its ambit.

For better understanding and interpretation, difference between Equalisation Levy on “Specified Services” and on “E-Commerce Supply of Services for professional fraternity, is being clarified in tabular format as below:

SUBJECT SPECIFIED SERVICES E-COMMERCE SUPPLY OF SERVICES
Definition “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;

Section 164(ca):-Newly Introduced

‘(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);‘;

Enforcement Date 01/04/2016 01/04/2020
Rate 6% 2%
Covered Section 165(1):

EL charged on 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.

Section 165A(1):

EL shall be charged on 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.

Not-Covered Section 165(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.

Section 165A(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.

Section 165A(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 & Recovery of Equalisation Levy Section 166(1):

> Every person, being a resident and carrying on business or profession or a non-resident having a permanent establishment in India (hereafter in this Chapter referred to as assessee)

> shall deduct the equalisation levy from the amount paid or payable to a non- resident in respect of the specified service at the rate specified in section 165 i.e. 6%,

> if the aggregate amount of consideration for specified service in a previous year exceeds one lakh rupees.

Section 166(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.

Section 166(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).

(that means we not deducted still assessee will be supposed to make payment)

Section 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:

Sr. No. Date of Ending the Quarter of FY Due Date of FY
1 30th June 7th July
2 30th September 7th October
3 31st December 7th January
4 31st March 31st March
Specified Limit Aggregate 1 Lakh Rupees Sales, turnover or gross receipts 2 Crore or more
Penalty a penalty equal to the amount of equalisation levy that he failed to deduct; and a penalty equal to the amount of equalisation levy that he failed to pay; and”;
Type of Transactions B2B Only B2B & B2C also

Disclaimer: The content of this article are for information purposes only and does not constitute 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 to 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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