Did you know after deducting and depositing equalization Levy, you need file a return of Equalization levy by 30th June of the year following the year for which the Equalization levy has been paid?
If not, we will tell you all about that in this article.
Before we discuss about the equalization levy return let us first understand what is equalization levy.
From 1st of June 2016, A new chapter VIII titled ‘Equalization levy’ was inserted in the finance bill to provide for an equalization levy of 6% of the amount of consideration for specified services received or receivable by a non-resident not having a permanent establishment (‘PE’) in India, from a resident in India who carries out business or profession, or from a non-resident having a permanent establishment in India.
Therefore, this is a charge that is to be paid by a non-resident person who provides specified services to a resident of India who is carrying on a business in India or to a non-resident who has a PE in India and is to be charged on the consideration received by such non-resident for providing such specified services.
Ques: Now what are the specified services on which equalization levy is to be charged?
Ans: “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;
Therefore, any service relating to online advertising or providing any space or facility for online advertisement is chargeable to equalization levy at 6%.
For example, if you advertise your business on Facebook or LinkedIn etc. then the consideration paid to such online companies for online advertisements on their websites is subject to equalization levy.
Ques: Are there any other charges on which equalization levy is to be paid?
Ans: From 01st April’2020 onwards, equalization levy shall also be charged at the rate of 2% on of 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.|
Therefore, equalization levy will also be levied on e-commerce supplies made by non-resident e-commerce supplier to a person resident in India or a person using an Indian IP Address. The important thing to note here is that equalization levy is charged on supply of goods and service both in this case as opposed to only services in the case of specified services. The EL in case of an e-commerce supply will be at 2% of the consideration for such supply.
Consideration received or receivable from e-commerce supply or services shall include:
I. consideration for sale of goods irrespective of whether the e-commerce operator owns the goods, so however that it shall not include consideration for sale of good which are owned by a person resident in India or by permanent establishment in India of a person non-resident in India, if sale of such goods is effectively connected with such permanent establishment; and
II. consideration for provision of services irrespective of whether service is provided or facilitated by the e-commerce operator, so however that it shall not include consideration for provision of services which are provided by a person resident in India or by permanent establishment in India of a person non-resident in India, if provision of such services is effectively connected with such permanent establishment.
Ques: What are the circumstances in which Equalization Levy is not leviable?
Ans: EL will not be leviable in the following cases:
Ques: What are the due dates for the payment of Equalization Levy and the repercussions for non-compliance?
Ans: Just like Tax deduction at Source, the EL has to be paid by the 7th day of the month following the month in which equalization levy is collected. This is applicable only for EL deducted on specified services i.e online advertisement related.
Therefore, for example the EL for the month of March has to be paid by the 7th of April. The important point to be noted here is that even for the month of March the last date to pay the EL to the credit of the Central Govt. is 7th of next month i.e. 7th of April.
However, in case of EL on e-commerce supplies, the EL has to 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 as below:
|Quarter ending||Due date|
|1.||30th June||7th July|
|2.||30th September||7th October|
|3.||31st December||7th January|
|4.||31st March||31st March|
Consequences on failure to deduct EL:
Ques: In case of e-commerce supply are their any circumstances in which EL is not leviable other than the ones mentioned above?
Ans: EL will not be levied on e-commerce supplies where the 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 by it is less than rupees 2 crores during the previous year.
Ques: Is there any return of equalization Levy to be filed after deduction and deposit?
Ans: Yes, there is annual statement of EL to be filed in Form 1 on the IT Portal in the assessee’s login on or before 30th June of the financial year following the year in which the EL has been deducted/collected. The statement shall contain details of all specified services or e-commerce supply or services during such financial year.
Ques: Is there any penalty on late filing of statement in Form 1 for equalization Levy?
Ans: There is penalty of Rs. 100/- per day in case of non-furnishing of statement of EL by 30th June. Therefore, please file the statement in form-I to avoid penalty.
Ques: Can the annual statement if of EL be revised?
Ans: Yes, where the assessee or the e-commerce operator notices any omission or wrong particulars in the statement filed, he may furnish a revised statement, at any time before the expiry of two years from the end of the financial year in which the specified services was provided or e-commerce supply or services was made or provided or facilitated. Therefore, for example if you take online digital marketing services from Facebook in Feb’2023, then statement in Form-1 needs to be filed by 30th June’2023 and in case of an error, the same can be revised up to 31st March’2025.
Ques: Who is required to furnish statement in Form I i.e annual statement of EL?
Ans: The return can be filed under section 167 subsections (1), (2) and (3). As explained earlier any person required to deduct or collect Equalization levy on specified services or e-commerce supplies is required file annual statement in Form-I setting forth such particulars as may be prescribed, in respect of all specified services or e-commerce supply or services, as the case may be during such financial year.
Any person who has not furnished the annual statement within the prescribed time of 30th June can furnish the belated return under section 167(2) or any person who notices an error in the return can file a revised statement under this sub section.
Also, if any person required to file annual statement of EL fails to do so, the assessing officer may serve a notice to such person to file the annual statement and on receiving such notice, such person may file the statement under sub-section (3) of section 167.
Ques: What are some of the details required to be filled in the annual statement of EL?
Ans: Some of the details that are required to be filled in the return of EL i.e form-I are:
Some other Points related to Equalization Levy
(The author is a Chartered Accountant and can be contacted at firstname.lastname@example.org or email@example.com or Mobile: +91-9953199493)