B J S And Associates

Equalisation levy

Introduction

  • Due to advent of Internet and push for digital economy, huge opportunities have opened for online services. National boundaries are now not an obstruction as you do not need physically present in any country to provide such services. This has also created a new tax issue as to how to tax these companies when they earn profits from a country without being Resident in that country or without even having a PE there.  
  • Equalisation levy was introduced through Section 165 of Finance Act 2016 to impose tax on such entities earning revenue from online advertisement and other digital services from Indian concerns but do not have any physical presence in India. 
  • The Equalisation levy is not part of Income tax Act. IT is covered under Chapter VIII (section 163 to 180) of Finance Act 2016

Applicability

Initially it covered only 

  1. consideration paid or payable to a non-resident person who does not have PE in India or services are not connected with Indian PE of such NR.
  2. for the online advertisement services and other related services such as provisioning of digital space 
  3. from Indian Resident carrying business or profession and PE of NRs. 
  4. It was taxed at 6% when it exceeds Rs 1,00,000 per Service Provider in a year.

Finance Act 2020 has extended scope of Equalisation levy through section 165A. As per Section 165A, 

an equalisation levy shall be charged at the rate of 2% 

on amount of consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by e-commerce operator (Who is Non Resident and gross receipts of e-commerce operator from e-commerce supply or services are not less than Rs. 2 crore during the previous year) to

  1. A person resident in India or,
  2. A non-resident on sale of advertisement which targets a customer, who is resident in India or to a customer who accesses the advertisement through Internet protocol address (IP address) located in India
  3. A non-resident on sale of data, collected from a person who is resident in India or from a person who uses internet protocol address (IP address) located in India
  4. A person who buys such goods or services or both using internet protocol address (IP address) located in India.

Except when who does not have PE in India or services are not connected with Indian PE of such NR or This transaction is already subject to levy u/s 165.

E-commerce services includes

  1. Online sale of goods owned by e-commerce operator; or
  2. Online provision of services provided by the e-commerce operator; or
  3. Online sale of goods or provision of services or both facilitated by the e-commerce operator or
  4. Combination of above activities.

Payment and Return

The Levy deducted by Payer u/s 165 shall be deposited to credit of CG by 7th of the following month in which levy was deducted.

The equalisation levy u/s 165A shall be paid by every e-commerce operator to the credit of central government by quarterly by 7th  of the following month (Except for March Quarter due date in 31st March)

Form  1 Shall be filed by 30th June of the Year immediately following the Financial year. 

Interest and Penalty

Simple interest at the rate of one percent of such levy for every month or part of the month of delay in payment to CG shall be levied.

Penalty
  1. Failure to Deduct Levy u/s 165 – Amount of levy that he failed to deduct
  2. Failure to pay Levy u/s 165 – Rs. 1000 per day of default up to Amount of levy that he failed to deduct
  3. Failure to pay Levy u/s 165A – Amount of levy that he failed to deduct
  4. Failure to File Form 1 – Rs. 100 per day of default.

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