Have you filed Equalization Levy annual return yet?

Did you know after deducting and depositing equalization Levy, you need file a return of Equalization levy by 30^th 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 01^st 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—

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:

• If the non-resident service provider or e-commerce operator has a PE in India and income from such specified services is effectively connected with such PE
• In case of sale of goods, If the non-resident e-commerce supplier has a PE in India and if sale of such goods is effectively connected with such permanent establishment.
• If consideration paid is not for the purpose of carrying out business or profession
• Aggregate amount of consideration does not exceed one lakh rupees in any previous year.

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 7^th 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 7^th 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 7^th of next month i.e. 7^th 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:

 Consequences on failure to deduct EL:

• In case of failure of the assessee to pay the EL by the 7^th of the following month, Interest shall be paid on such levy at a simple interest of 1% per month or part of the month of the delay.
• Also, even if the person has not deducted such levy from the consideration paid to such non-resident, he will still be liable to pay such levy to the credit of the central government.
• In order to ensure compliance, the expenses incurred by the assessee towards specified services chargeable to such levy shall not be allowed as deduction in case of failure of the assessee to deduct and deposit the equalisation levy to the credit of the Central Government

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 30^th 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 30^th 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 30^th June’2023 and in case of an error, the same can be revised up to 31^st 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 30^th 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:

• The details of the Jurisdictional AO to whom the return is to be filed.
• The total amount of consideration paid or credited for the specified services (i.e online advertising related)
• The total amount of consideration received or receivable by the ecommerce operator from E-Commerce Supply or Services (In case of EL on E-commerce supplies this will be will taken quarterly for each quarter)
• Equalization Levy payable on such supply i.e 6% or 2% of the above as the case maybe
• Total EL deducted
• Total EL paid
• The EL paid and EL deducted may be different due to interest on EL paid along with EL. The amount of interest is to be mentioned separately.
• In case the EL is paid in excess genuinely it can be refunded by filing this return
• The name and address of the non-resident providing the specified services
• PAN or Aadhar of the Non-resident, if available
• Amount of consideration paid/credited or received or receivable by each non-resident in case the there are more than one Non-residents on which EL is liable to be paid.
• Date of payment/credit of amount of consideration for the specified services. This will be as per each bill received in r/o such services.
• EL in respect of each transaction.
• Interest and penalty on the above.
• Details of challan(s) in which EL is paid. EL will be paid on the IT Portal through challan No. ITNS 285.
• Date of filing original EL statement in case revised statement being filed
• In case EL is being filed in pursuance of a notice being given by the AO. The DIN of such notice is to be given in the statement of EL to be filed by the assessee.
• The statement of EL can be filed through EVC or digital signatures electronically.

Some other Points related to Equalization Levy

• In order to avoid double taxation, exemption under section 10 (50) of the IT Act’1961 is provided for any income arising from specified services provided, on which equalisation levy is chargeable
• Any income which is chargeable to tax as royalty or fees for technical services shall not be included as income for the purpose of Equalization Levy.
• Therefore, if an amount is subject to EL and EL has been paid on the same. The same amount can be taxed as income of the recipient under the IT Act’1961 again.

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(The author is a Chartered Accountant and can be contacted at [email protected] or [email protected] or Mobile: +91-9953199493)