Equalisation Levy @6% on Digital Ads
Equalisation Levy as introduced by Finance Bill 2016 in Union Budget 2016-17, to address the challenge of digital economy. This has been in effect from 1st June 2016. The purpose is to tax the e-commerce transactions/digital business which is conducted without regard to national boundaries.
Reason for Introduction of Equalisation Levy:
Many companies which are providing services in a cyberspace register themselves in a country where the tax rate are very low and pay very low taxes on their global income. The issue of taxing these global advertisement giants has been on the mind of tax authorities of several countries.
If we talk about India –Introduction of equalization levy would fetch the government a lot of money which till now was not taxed.
Google and the Facebook are the major contributors to this tax. This tax is also known as Google tax since the major tax revenue for Government under this comes from Google.
“Equalisation Levy” provides for an equalization levy of 6% of the amount of consideration for specified services received or receivable by a non- resident not having permanent establishment(PE) in India, from a resident in India who carries out business or profession, or from a non-resident having permanent establishment in India.
- Online advertisement,
- Any provision for digital advertising space or any other facility or service for the purpose of online advertisement,
- Any other services as may be notified by the Central Government.
No levy if aggregate amount of consideration does not exceed one lakh rupees in any previous year.
Equalisation Levy will not be Charged:
- If service provider being a non-resident having PE in India.
- Service Provider is a resident in India.
- Amount of consideration is less than Rs. 1 lakh.
Person Responsible for Deduction of Equalisation Levy:
- Being a resident and carrying on business or profession, or
- A non-resident having PE in India
has to deduct equalisation levy from the amount paid or payable to a non-resident in respect of a specified service.
Rate of Equalisation Levy: @6% of the amount of consideration.
Due Date of Depositing Equalisation Levy:
The equalisation levy so deducted during the month has to be paid by the assesseeto the credit of the Central Government by the 7th of the next month.
Due date of furnishing Equalisation Levy Statement (Form-1):
Due date of furnishing equalization levy statement is 30thJune of the Financial Year ended(after the end of the financial year the assessee has to furnish Form-1 on or before 30th June)
Revision or Late Submission of Form-1:
In case an assessee fails to furnish statement within specified time limit or has filed the statements on time but later he notices any omission or wrong particulars therein, may furnish a belated or a revised statement as the case may be. Such statement has to be filed at any time before the expiry of the two years from the end of the financial year in which the specified service was provided.
Delayed Payment of Equalisation Levy:
If the amount of levy not deposited within a specified time then assessee shall have to pay 1% interest on such levy for every month or part of the month delayed.
Failure to Deduct or Pay Equalisation Levy:
Failure to deduct equalization levy- Penaltyamount will be equal to the amount of equalisation levy that he failed to deduct would be leviable.
Levy has been deducted but not deposited- Penalty amount in this case will be Rs. 1,000 for every day during which the failure continues is leviable.
Failure to Furnish Statement:
If assessee fails to furnish the equalization levy statement within the prescribed time, he has to pay penalty of Rs. 100 for every day during which the failure continues.
Circumstances when Penalty Cannot be Imposed:
No penalty for failure to deduct or pay equalization levy or failure to furnish statement shall be imposable, if the assessee proves to the satisfaction of the Assessing Officer that there was reasonable cause for the said failure.
Note: No order imposing a penalty under this chapter shall be made unless the assessee has been given a reasonable opportunity of being heard.