Equalisation Levy (EL) on Specified Services and E-commerce Supply or Services, Finance Act 2020
In Finance Act, 2020 the scope of Equalisation Levy has been expanded to include Equalisation levy of 2 % by an ‘e-commerce operator’ from ‘e-commerce supply or services’. In this article I have discussed the existing Equalisation Levy provisions along with new amendment related to E-commerce supply or services.
Equalisation Levy means tax leviable and it shall apply to consideration received or receivable
- for specified services provided
- for e-commerce supply or services made or provided or facilitated w.e.f. 01/04/2020
A. Important Definitions
- Specified Services: means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf
Online means a facility or service or right or benefit or access that is obtained through the internet or any other form of digital or telecommunication network.
- E-commerce supply or services: means-
a. online sale of goods owned by the e-commerce operator or
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
d. any combination of above activities
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.
B. Rate/Charge of Equalization Levy:
- On Specified Services @6% of the amount of consideration for any specified service received or receivable by a person, being a non-resident from—
(i) a person resident in India and carrying on business or profession; or
(ii) a non-resident having a permanent establishment in India.
Exemption: The Equalisation Levy @6% shall not be charged in following three cases:
(a) PE in India: the non-resident providing the specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment;
(b) Limit of Rs 1 lakh: the aggregate amount of consideration for specified service received or 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 one lakh rupees;
(c) Personal Purposes: where 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.
- On E-commerce supply or services @2% of the amount of consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it-
(i) to a person resident in India
(ii) to a non-resident in the following circumstances
- sale of advertisement, which targets a customer, who is 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.
(iii) to a person who buys such goods or services or both using internet protocol address located in India
Exemption: The Equalisation Levy @2% shall not be charged in following three conditions:
(i) PE in India: 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;
(ii) Already charged @6%: where the equalisation levy is already leviable @6% as Specified Services i.e. online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement;
(iii) Limit of 2 crore: 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 2 crore rupees during the previous year.
C. Due Date of Payment of Equalisation Levy to the credit of Central Government
- For Specified Services: To be paid by person, being a resident and carrying on business or profession or a non-resident having a permanent establishment in India by the 7th day of the month immediately following the month in which EL was deducted or was deductible.
- For E-commerce supply or services: To be paid to be paid by the non-resident e-commerce operator quarterly in following manner:
D. Furnishing of Statement
The statement to be furnished electronically in Form No. 1 (verified through either a digital signature or an electronic verification code by an authorised signatory) on or before 30 June immediately following the financial year. Penalty for non-filing within the time prescribed is Rs 100 per day upto the date of failure. Revision or late statement could be filed anytime before the expiry of two years from the end of the financial year in which service was provided.
E. Interest on Late Payment of Equalisation Levy: Interest at the rate of 1% (Simple Interest 12% p.a.) of such levy for every month or part of a month by which such crediting of the tax or any part thereof is delayed shall be charged. Due to COVID-19, this interest rate has been relaxed to 9% p.a. for the period between 20.03.2020 to 30.06.2020.
F. Penalty for failure to deduct or pay Equalisation Levy:
Penalties would be charged in addition to interest and Equalisation Levy.
G. Disallowance under Income Tax on non-compliance with Equalisation Levy on Specified Services
If deductible Equalisation Levy on Specified Services has not been deducted or paid before the due date specified in section 139(1), then the consideration paid or payable to non-resident shall be disallowed while computing the income under the head PGBP.
H. Exemption under Income Tax
Exemption under Section 10(50) has been provided in relation to any income arising from any Specified Service or arising from any E-commerce supply or services made or provided or facilitated on or after the 1st day of April, 2021 and chargeable to equalisation levy. (In Finance Act 2020 the date is 01.04.2021 though it should be 01.04.2020).
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