All you need to know about Equalisation Levy
Equalisation Levy was introduced in India in 2016, with the intention of taxing the digital transactions i.e. the income accruing to foreign e-commerce companies from India. It was aimed at taxing business to business transactions and was applicable to consideration received or receivable for specified services provided.
What do you mean by Equalisation Levy?
Equalisation Levy is a direct tax, which is withheld at the time of payment by the service recipient. The following conditions are to be met to be liable to equalisation levy:
- The payment should be made to a non-resident service provider
- The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.
The Equalisation Levy is levied on gross receipts from e-commerce supply. Further, the Equalisation Levy is outside the ambit of income tax as it was introduced through Finance Act, 2016, and is therefore not covered by double taxation avoidance agreements (DTAAs). Consequently, non-residents subjected to Equalisation Levy cannot claim relief under DTAAs and will not be entitled to credit for Equalisation Levy paid in India in their country of residence.
What is the charge of Equalisation Levy?
The charge of equalisation levy shall be at the rate of 6% of the amount of consideration for any specified service received or receivable by a person, being a non-resident from:
- a person resident in India and carrying on business or profession; or
- a non-resident having a permanent establishment in India
When shall Equalisation Levy not be applicable?
The equalisation levy shall not be charged, when:
- the non-resident providing the specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment
- the aggregate consideration for specified service received/receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed Rs 1 lakh
- the payment for the specified service by the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession
What is the applicability of Equalisation Levy on e-commerce operators?
From the 1st of April, 2020, equalisation levy was charged at 2% of the amount of consideration received/receivable by an e-commerce operator from e-commerce supply or services made, provided or facilitated by it:
- To a person resident in India
- to a non-resident in the specified circumstances
- to a person who buys such goods, services or both using internet protocol address located in India
Specified circumstances as mentioned in the 2nd point means:
- sale of advertisement, which targets a customer, who is a resident in India or a customer who accesses the advertisement though 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
An E-Commerce Operator is a non-resident who owes, operates or manages, a digital or electronic facility or platform for online sale of goods or online provision of services or both. E-Commerce Supply or Services is the Online sale of goods owned by the e-commerce operator, Online provision of services provided by the e-commerce operator, Online sale of goods or provision of services or both facilitated by the e-commerce operator or any combination.
When shall Equalisation Levy not be applicable to an e-commerce operator?
The equalisation levy shall not be charged to an e-commerce operator:
- where the e-commerce operator making or providing or facilitating e-commerce supply or services has a permanent establishment in India and such e-commerce supply or services is effectively connected with such permanent establishment
- where the equalisation levy is leviable under section 165 which pertains to Charge of equalisation levy on specified services
- sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated is less than Rs 2 crores during the previous year
What is the due date of payment of equalisation levy?
Equalisation levy is to be paid by every e-commerce operator quarterly within following due dates.
|Date of ending of the quarter||Due Date|
|30th June||7th July|
|30th September||7th October|
|31st December||7th January|
|31st March||31st March|
What is the due date of submission of statement of equalisation levy?
Due date of furnishing Equalisation Levy Statement (Form-1) is on or before 30th June of Financial Year ended. This is an annual statement.
What are the consequences of delayed payments?
In case there is a delay in payment, interest is charged at 1% of the outstanding levy for every month or part thereof is delayed.
What are the consequences of non-compliances on behalf of the service recipient?
The compliance procedure for the Equalisation Levy is the responsibility of the service recipient. The following shall be the consequences of non-compliances on behalf of the service recipient.
Penalty for failure of payment
- Equalisation Levy not deducted: Penalty equal to the amount of levy failed to be deducted (along with interest and depositing of the principal levy outstanding).
- Equalisation Levy deducted but not deposited: Penalty equal to Rs 1,000 per day subject to the maximum of the levy failed to be deducted (along with interest and depositing of the principal levy outstanding).
- Disallowance of such expenditure in the hands of the payer (unless the defect is rectified).
Penalty for failure of filing statement of compliance
Rs 100 per day for each day the non-compliance continues.
If a false statement has been filed then the person may be subjected to imprisonment of a term up to 3 years and a fine.