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April 8, 2020

Equalisation Levy on Non Resident E Commerce Operator as per Finance Act 2020 from 1 April 2020

Equalisation Levy on Non Resident E Commerce Operator as per Finance Act 2020 from 1 April 2020

Start of Equalisation Levy in Finance Act 2016

Many online portals like Facebook, Google, twitter, Linkedin etc. are non-resident earning advertising income from India. However as they are Non Resident and has no permanent establishment in India, their income of advertisement is not taxed in India. However the Business paying for advertisement are claiming as a business expenditure under section 37 of Income Tax

For example, ABC company is Domestic Company in India and has made payment to Facebook for advertisement, since Facebook don’t have any permanent establishment in India and ABC company will take deduction and amount received by payee is not taxable, this was one of reason to bring equalisation levy so, Finance Act 2016 has introduced the concept of Equalisation Levy with effect from 01/06/2016. Under Equalisation Levy from 2016 the person making the payment for Online Advertisement Services is liabile to deduct 6% as Charge and deposit the amount to the government.

Amendment in Equalisation Levy as per Finance Act 2020

Under the Finance Act 2020 has extend the scope by interesting a new provision to cover the consideration received or receivable for e-commerce supply or services made or facilitated by an e-commerce operator.

As per section 165A the equalisation levy shall be payable by the Non resident ecommerce operator at the rate of 2% of consideration received or receivable for e commerce supply or services made or facilitated to the following persons:

  1. A person who is resident in India
  2. A person who buys such goods or services or both using internet protocol address located in India
  3. A non-resident person in the following circumstances:
    1. 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 &
    1. Sale of data collected from a person who is a resident in India or from a who uses internet protocol address located in India

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.

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

Exemption from equalisation levy Section 165A(2)

Equalisation levy shall not be payable by the e commerce operator:

  1. If the sale turnover or gross receipt of the e commerce operator from e commerce supply or service made or provided or facilitated to the person mentioned above is less than 2 crore in aggregate during the previous year.
  2. If such operator has permanent establishment in India as it will be covered in normal provision of Income Tax Act to pay Tax in India
  3. Online Advertisement Service Covered in Section 165. 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. 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.

Who will be Liabile to Pay Equalisation Levy

Section 166 contains provisions for collection and recovery of equalisation levy on online advertisement services, which casts the obligations on the payer to deduct equalisation levy from the sum paid or payable to the non-resident advertiser.

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.

Due date of payment of equalisation levy:

Equalisation levy on Advertisement shall be deposited to central government up to 7th of next month through Challan No./ITNS 285. Pay equalization levy from here.

The Equalisation Levy in respect of online supply of goods and services shall be paid to the credit of central government on quarterly basis on following due dates

PeriodDue Date
1st April to 30th  June7th  July
1st July to 30th  September7th October
1st October to 31st December7th January
1 January to 31st March31st March

Following the details required for tax payment:

a.            PAN of the entity who is responsible for making payment

b.            Financial year for which the payment is related

c.            Address of the person who is responsible for making payment

d.            Amount of equalization levy to be paid

Interest on late payment of Equalisation Levy:

As per section 170 Interest at the rate of 1% per month or part of the month is applicable on late deposit of Equalisation Levy.

Penalty for failure to deduct or pay Equalisation Levy (Section 171):

Where the person fails to deduct Equalisation Levy then he is liable for penalty equal to 100% of equalisation levy that assessee failed to deduct.

Due date of furnishing statement of Equalisation Levy:

Every assessee liable for equalisation levy has to File Statement of equalisation levy in FORM NO. 1 on or before 30th June of the immediately following financial year under Electronically under digital signature; or Electronically through EVC (Electronic Verification Code)

The particulars of Form no 1: Equalization levy is as below:

  1. Name and address of the assessee
  2. PAN of the assess
  3. Total amount of consideration paid or credited for specified services made
  4. Amount of equalisation levy to be deductible on such payment
  5. Total late payment interest payable on such equalization levy under section 167
  6. Details of equalisation levy paid through challan

Revise Returns or Belated Returns

In case the assessee has not furnished the return within the time limit or furnished the return within time, noticed any mistake, may furnish a revised return. Such belated or revised return has to be furnished within 2 years from the end of financial year in which specified service was provided

No Income Tax

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.

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