1.1. Scope of equalisation levy extended
The Finance Act, 2016 introduced Equalisation Levy with
effect from 01-06-2016. This levy is charged at the rate of 6% from the
consideration paid or payable to a non- resident person for the online
advertisement services. The Finance Bill, 2020, as passed by the Lok Sabha, has
extended the scope of Equalisation Levy to cover within its scope the
consideration received or receivable for e-commerce supply or services made or facilitated by an e-commerce operator.
With effect from 01-04-2020, there will two transaction
in respect of which equalisation levy shall be charged, namely:
a) Sum received or receivable by a non-resident for the online
advertisement services rendered to a specified
persons;
b) Sum received or receivable by an e-commerce operator from e-commerce supply
of goods or services to specified persons.
1.2. When equalisation levy shall be charged?
From 01-04-2020, the equalisation levy shall be charged
at the rate of 2% from the consideration received or receivable by an
e-commerce operator from e-commerce supply of goods or services made or
provided or facilitated by it to the following persons:
a) A person who is resident in India;
b) A person who buys such goods or services or both using internet
protocol address located in India;
c)
A non-resident person in the
following circumstances:
§ Sale of advertisement which targets a customer who is resident in
India or a customer who accesses the advertisement through internet protocol
address located in India; and
§ Sale of data collected from a person who is resident in India or
from a person who uses internet protocol address located in India.
2.2-1. Meaning of 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.
2.2-2. Meaning of e-commerce supply or services
E-commerce supply
or services means:
a) Online sale of goods owned by the e-commerce operator;
b)
Online provision of services
provided by the e-commerce operator;
c) Online sale of goods or provision of services or both facilitated by
the e-commerce operator; or
d) Any combination of above activities
1.3. When equalisation levy shall not be
charged?
As per Section 165A(2) of the Finance Act, 2016, the
equalisation levy shall not be charged in the following three circumstances:
2.3-1. Online advertisement service covered under
Section 165
Equalisation levy under Section 165 (from sum received
or receivable from online advertisement services) and equalisation levy under
new Section 165A (from online sale of goods and services) are mutually
exclusive provisions. Equalisation levy under Section 165A shall not be charged
if it is subject to levy under
Section 165. However, the preference shall be given to Section 165. In other
words, if nature of a transaction is
such that the equalisation levy can be charged both under Section 165 and
Section 165A, it shall be charged under Section 165. The preference to Section
165 has been given because levy is charged under this provision at the higher
rate of 6% in contrast to 2% under Section 165A.
2.3-2. Consideration is less than threshold limit
Equalisation levy shall not be charged if the sale,
turnover or gross receipts of the e- commerce operator from e-commerce supply
or services made or provided or
facilitated to the persons mentioned above is less than
Rs. 2 crore during the previous year.
It is to be noted that limit of Rs. 2 crore is not buyer
specific and shall include total turnover from all the specified buyers. Thus,
where the total turnover of e-commerce operator from specified buyers exceeds
Rs. 2 crore in a financial year, it has to pay equalisation levy of 2% on its
total turnover from said buyers.
2.3-3. E-Commerce operator
has a PE in India
Equalisation levy shall not be charged if the e-commerce
operator has a PE in India and the
service is effectively connected with
such PE. This immunity has been given as
the source country has an absolute right to tax the income generated by a
foreign enterprise which is attributable to a PE situated in the source
country. Thus, the revenue generated by an e-commerce operator (who also have a
PE in India) from Indian operations shall be taxable in India as per normal
provisions of the Income-tax Act.
1.4. Who is liable to pay equalisation
levy?
Section 166 contains provisions for collection and
recovery of equalisation levy on online advertisement services. A new Section
166A has been introduced for collection and recovery of equalisation levy on
online supply of goods and services.
Section 166 casts the obligations on the payer to deduct
equalisation levy from the sum paid or payable to the non-resident advertiser.
However, Section 166A shifts this obligation to deposit the equalisation levy
on the e-commerce operator. Thus, any person responsible for paying any sum to
a non-resident e-commerce operator will not be liable to withhold the amount
towards equalisation levy and deposit it with
the Central Govt. This obligation is of e-commerce operator only.
1.5. Due date for deposit of equalisation levy
Unlike the equalisation levy on online advertisement
services which is payable on monthly basis by 7th day of the
next month, the equalisation levy in respect of online supply of goods and
services shall be paid to the credit of central government on quarterly basis.
The due dates for payment of equalisation levy in respect of online supply of
goods and services have been prescribed in the below table:
|
Period
|
Due date
|
|
|
|
|
April 1st – June 30th
|
7th July
|
|
July 1st – September 30th
|
7th October
|
|
October 1st – December 31st
|
7th January
|
|
January 1st – March 31st
|
31st March
|
1.6. Consequences of late payment
2.6-1. Interest
An e-commerce operator who fails to deposit the
equalisation levy to the credit of central government by due date shall be liable
for payment of simple interest at the rate of 1% of such levy for every month
or part of the month during which such failure continues.
2.6-2. Penalty
A payer is liable to deduct the equalisation levy under
Section 165 in respect of online advertisement services, thus, penalty may be
charged on him for two defaults – one
for not deducting the equalisation levy, and second, for deducting but
not depositing the levy with in the due dates.
However, for the equalisation levy payable under Section
165A, the penalty is levied only on the e-commerce operator on its failure to
deposit the levy with the Indian Govt. Where an e-commerce operator fails to
pay whole or any part of the equalisation levy required to be paid by him, he
shall be liable for payment of penalty of an amount equals to the amount of
equalisation levy that he failed to pay.
1.7. Statement of equalisation levy
Every e-commerce operator shall prepare and deliver or
cause to deliver a statement of
equalisation levy in respect of all e-commerce supply or services during such
financial year. Such statement is required to be filed with the Assessing
Officer or to any other authority or agency authorised by the Board in this behalf.
2.7-1. Due date
Statement of equalisation levy is required to be
furnished on or before 30th June of the financial year
immediately following the financial year in which equalisation levy is
chargeable.
2.7-2. Manner of furnishing
Statement of equalisation levy is to be furnished in
Form 1. Such form can be furnished in the following manner:
a) Electronically under digital signature; or
b) Electronically through EVC (Electronic Verification Code) i.e. a
code generated for the purpose of electronic verification of the person
furnishing statement.
2.7-3. Belated or Revised Statement
Any e-commerce operator who has not furnished statement
by the due date, he can furnish such statement at any time before the expiry of
2 years from the end of the financial year in which such e-commerce supply or
services was made or facilitated.
Similarly, an e-commerce operator who has furnished such
statement, notices any omissions or wrong particulars therein, he may furnish a
revised statement at any time before the expiry of 2 years from the end of the
financial year in which such e- commerce supply or services was made or
facilitated.
1.8. Other provisions
Other provisions relating to processing of statement,
appeal, prosecution, etc. are same both in respect of equalisation levy
payable under Section 165 or 165A. All consequential amendments have been made
in other provisions.
NO TAX ON INCOME ARISING FROM
E-COMMERCE SUPPLY ON WHICH EQUALIZATION LEVY IS CHARGEABLE
[Applicable from Assessment
Year 2021-20]
Section 10(50) of the Income-tax Act provides that
incomes in respect of which equalization levy has been charged shall be exempt
from tax. Hence, no Income-tax would be charged on consideration received or
receivable for specified services which are subject to such levy.
The Finance Bill, 2020 (as passed by the Lok Sabha) has
extended the scope of Equalisation Levy to cover within its scope the
consideration received or
receivable for e-commerce supply
or services made or facilitated by an e-commerce operator. Thus, with effect
from 01-04-2020, there will be two transactions in respect of which
equalisation levy shall be charged, namely:
a) Sum received or receivable by a non-resident for the online
advertisement services rendered to specified persons;
b) Sum received or receivable by an e-commerce operator from e-commerce
supply of goods or services to specified persons.
Consequential amendments have been made to section
10(50) to give tax exemption for the
income arising from any e-commerce supply or services made, on or after 01-
04-2020, on which equalization levy is chargeable.
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