Meaning: Equalisation levy is a form of direct tax withheld at the time of payment by the recipient of services.
Conditions for Services (Effective from
01.06.2016): Payments
must be made to a non-resident, and the aggregate consideration should not
exceed Rs 1 lakh in the fiscal year.
Covered Services (Effective from
01.06.2016) Taxed at 6%: Online advertisements, any provision of
digital advertising space, and related facilities or services for online
advertising are subject to a 6% equalisation levy.
Equalisation Levy on E-commerce Supply or
Services (Finance Act 2020): As per the Finance Act 2020, an
equalisation levy of 2% is imposed on the consideration received or receivable
by an e-commerce operator from the e-commerce supply of goods and services.
This applies to transactions with residents or non-residents under specified
circumstances, or individuals using IP addresses located in India for
purchasing such goods or services.
Exemptions for E-commerce Operators: The
equalisation levy does not apply to e-commerce operators in cases where they
have a permanent establishment in India and conduct e-commerce supply through
that establishment. Additionally, the levy is not applicable if the sales,
turnover, or gross receipts from e-commerce supply or services during the
previous year are less than Rs 2 crore.
No Tax Credit in Home Country: Since
equalisation levy is not a part of the Income Tax Act, 1961, non-resident
e-commerce operators cannot claim tax credits for it in their home country. In
the event of failure to deposit the equalisation levy, a penalty equivalent to
the unpaid amount will be imposed on the e-commerce operator.
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