Equalisation Levy 2020 E commerce Service Provider 2 percent cases
However, as of April 1, 2020, the Indian government has extended the scope of the equalization levy. The Finance Act, 2020, introduced a new provision – Section 165A – which mandates that non-resident e-commerce operators providing e-commerce supplies or services to Indian residents must remit an equalization levy.
This levy, set at a rate of two percent, is calculated based on the consideration received or expected from e-commerce supplies or services facilitated, provided, or delivered by the said operator.
But Note : This EL is NOT on the Indian Customer ( payer of money… )
BUT…. it is on the non resident Ecom operator
Non-Resident E-commerce Operators required to make compliances in India
It is pertinent to note that unlike Equalisation Levy 2016 on online advertisements, the obligation to deposit the Equalisation Levy on e- commerce transactions is on the non-resident e-commerce operator only and not on the payer. The payment of the levy to the government is to be made on a quarterly basis and also an annual statement on Equalisation levy is to be filed by such non-resident e-commerce operators.
Source 3 : https://icmai.in/TaxationPortal/upload/DT/Article/118_0811_23.pdf
Now, the equalization levy encompasses e-commerce transactions involving the sale of goods and services by non-resident operators to Indian customers. This levy stands at two percent and is imposed on the consideration received or expected by these non-resident e-commerce operators. This change showcases the government’s endeavor to adapt taxation norms to the evolving landscape of digital business operations.
In essence, the equalization levy represents a taxation mechanism applicable to:
(a) Designated services, as established by the Finance Act of 2016; and
(b) E-commerce supplies or services, as delineated under the Finance Act of 2020.
The term ‘e-commerce supply or services’ encompasses the following activities:
- Online retailing of goods owned by the e-commerce operator; or
- Online delivery of services by the e-commerce operator; or
- Assisting in the online retailing of goods or provision of services, or both, by the e-commerce operator; or
- Any combination of the aforementioned activities.
Exceptions and exemptions
The equalization levy does not come into play under the following circumstances:
- The e-commerce operator maintains a Permanent Establishment (PE) in India, and the e-commerce supply or services is directly linked to this PE.
- The consideration received has already undergone the six percent equalization levy due to engagement in online advertising and related functions.
- The e-commerce operator’s sales, turnover, or gross receipts from the e-commerce supply or services, whether made, provided, or facilitated, remain below INR 20 million for the fiscal year.
Income tax relief
Starting April 1, 2021, amendments to the income tax regulations introduce an exemption for income generated by an e-commerce operator already subject to the equalization levy. See Section 10(50)
Means : if the E commerce operator has paid the EL , then no need of income tax ??? to discuss.
Exemption from Income-tax on Transactions Subjected to Equalisation Levy
Section 10(50) of the Income Tax Act, 1961 has been amended to provide an exemption from levy of Income tax to any income arising from any e-commerce supply or services on which is equalisation levy is chargeable. Notably, Equalisation levy is not part of Income Tax Act, 1961 hence, recourse to tax treaty may not be available. The foreign companies may not get tax credit / deduction in their home country for the equalization levy paid in India.
Compliance obligations for the equalization levy on non-resident e-commerce operators
To fulfill the compliance requirements for the equalization levy, certain crucial deadlines and actions need to be adhered to by non-resident e-commerce operators. Specifically:
- Annual statement filing deadline: An essential task entails filing an annual statement within the timeframe of April 1 to March 31, with the submission deadline set on June 30 of the corresponding financial year. This procedure is imperative for maintaining compliance.
- Late payment implications: Timely payment of the equalization levy is paramount. Failure to meet the stipulated payment deadline invites the imposition of simple interest at a monthly rate of 1% on any overdue amounts. Additionally, a non-resident e-commerce operator that neglects to pay the levy faces a penalty equal to the levy’s amount, amplifying the importance of adhering to the payment timeline.
- Penalties for non-filed annual statements: Non-compliance with the requirement to file the annual statement carries its own set of consequences. An additional penalty of INR 100 per day is enforced for each day of non-compliance, calculated for the period during which the default persists.
- Role of Permanent Account Number (PAN): In the process of fulfilling the aforementioned obligations, non-resident e-commerce operators would necessitate a Permanent Account Number (PAN). This requirement is crucial for further progress, despite not being a prior necessity when their earnings were not subject to taxation within India.
Incorporating the above compliance measures is vital for non-resident e-commerce operators to ensure adherence to India’s tax regulations, fostering a climate of fair taxation and regulatory accountability.
This is meant for E commerce operators only. Those non residents only.
Apparently not applicable for Indian company ??? To check
Is Equalisation Levy applicable if your company pays subscription to a foreign website, or Foreign Service Provider – Current Situation, Facts
AS THE END BUYER CUSTOMER… it is not applicable on you , sitting in India, as a subscriber in India.
