The Equalisation levy
A new tax imposed on non-resident eCommerce/online – service/goods provider @2% of the consideration received by them
Business is changing and so is the TAX. Now physical presence is not must to have but client can be served remotely using internet – Digital Business and Digital Economy. Similarly while originally tax laws were focusing on taxing the profit on the parameters of physical presence but now countries looking to tax digital business in one way or the other. Basic idea is to tax the profit on parameter based on the place where uses are there, value is being created and economic activity is carried out rather solely based on the physical presence of provider. Currently most of the countries are working for consensus and in the meantime has levied taxes, named either as Equalisation levy or some other name. Govt. of India is working on the same lines as well and decided to charge “Equalisation Levy” (“EL”)
Government of India, has levied Equalisation levy as an interim tax collection measure back in year 2016. At that time it was limited to online advertisement only – Levy @6% on the online advertisement services provided by non-resident entities. Now Indian Government has extended its scope to cover online provisions of services/supply of goods vide Finance Act 2020.
What’s implication on business?
New equalisation levy may be applicable on your business and be a cost for your business. When it comes to services, the extended scope will cover entities providing online services such as:
What is the extended scope of Equalisation levy
The Charge– Equalisation Levy will be charged @2% of the consideration received or receivable by an e-commerce operator pertaining to specified transactions entered into with certain specific set of person.
The Specified Transactions covered:
The specific set of persons with whom transaction are covered:
Consideration received or receivable for the transaction entered into with any of the following persons (Individual or business entity):
a) Person tax resident in India
b) Person Non-resident in following circumstance:
c) Person (resident in India or non resident in India) who buys such goods or services or both using IP address located in India
Other important points:
|Compliance/Action||Periodicity||Period Covered||Due Date|
|Deposition of EL to Indian Govt.||Quarterly||1St April to 30th June||7th July|
|1st July to 30th Sept||7th Oct|
|1st Oct to 31st Dec||7th Jan|
|1st Jan to 31st March||31st March|
|Filing of annual statement of EL||Annual||1st April to 31st March||30th June|
About Author – CA Nitin Goyal (B.Com (H), FCA, DISA, LL.B.)
Nitin is a partner with Manoj A Jain & Co., is a Chartered Accountant and law graduate having 17+ years post qualification experience in Indian tax and regulatory laws. He has experience of working with multinational and Indian business entities covering international & domestic tax matters and regulatory aspect including tax planning & transaction structuring, tax litigation & controversies, tax & regulatory aspect of employee mobility. Nitin has worked with Big 4 consultancy firm and held in-house managerial roles within large multinational organizations (HCL, Chicago Bridge & Iron and Amazon Web Services) overlooking their tax & regulatory functions. His experience allows him to suggest an overall executable solution to the business.
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