What is Equalisation levy?
Equalisation Levy is a direct tax, which is withheld at the time of payment by the service recipient.
History
Equalisation levy was first introduced in Finance Act 2016 but was paused in Lok sabha and cannot be implemented.
Finance act2020 again introduced the Equalisation levy and widened its scope.
Applicability
The Finance Act, 2020 has extended the scope of Equalisation Levy to include consideration received or receivable for e-commerce supply or services made or facilitated by an e-commerce operator.
· Leavy shall come into picture on every payments made after 1st April 2020.
· Equalisation leavy shall be charged @2 % on all the supply or services made by an E-Commerce operator to :
Person resident in india.
Person who buys such goods or services or both using IP address located in India.
Non Residents only in following cases:
Sale of advertisement, which targets customer, who is resident in india or a customer who accesses the advertisement through IP address located in india.
Sale of data collected from a person who is resident in india or from a person who uses IP address located in india.
What is E-Commerce Operator?
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.
What is E-Commerce Supply or Services?
Online sale of goods or services or both or any combination of the above activities shall constitute of E-commerce Supply or Services.
Equalisation Leavy shall not be charged if :
Non-resident e-commerce operator has a permanent establishment in India and E-Commerce supply or services is effectively connected with such establishment.
Where the equalisation levy is leviable under the existing provisions of the sum received or receivable from online advertisement services.
Sales, turnover or gross receipts of the e-commerce operator from e-commerce supply or services are less than 2 cr during the previous financial year.
What are the compliance you should keep in your mind regarding equalisation levy?
E-Commerce operator has the obligation to pay equalisation levy to the Government.
To be paid to the credit of central government on a quarterly basis (by 7 days from the end of the quarter, except for quarter ending March, whereinto be paid by 31st March.
Annual filing of statement- on or before 30th June of the financial year immediately following the financial year in which equalisation levy is chargeable.
If not paid on time – Interest shall be charged @1% of such levy for every month or part thereof during which such failure continues.
The penalty shall be charged @ 100% of default in addition to interest.
Further as per section subsection 50 of section 10 of income tax act provides that income in respect of which equalisation levy has been charged shall be exempt from tax. Hence, no Income Tax shall be charged on consideration received or receivable for specified services that are subject to equalisation levy.
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