Equalisation levy on E-commerce operator | All about equalisation levy

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Equalisation levy has been defined under Equalisation levy Act as:

“the tax leviable on consideration received or receivable for any specified service under the provisions of this Chapter;”

Till now the specified service on which equalisation levy was required to be paid was “online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement.”

Thus people used to pay 6% equalisation levy if they used to take services of advertising on Google or facebook or something like that and if the amount exceeded Rs. 1 lakh in a year and this would add to the cost of the person. According to section 166 of Equalisation levy act such equalisation levy was required to be collected only when the supplier is a non resident.

However with Finance Bill, 2020 a new service has been added to the list of equalisation levy where, consideration is received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it, to a person resident in India; or to a non-resident in the specified circumstances as referred to in sub-section (3), or to a person who buys such goods or services or both using internet protocol address located in India.

Equalisation levy shall be charged at 2% of the amount of consideration.

However the equalisation levy shall not apply in the following cases:

(1) Where 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 as referred to in sub-section (1) is less than two crore rupees during the previous year. or

(2) Where the equalisation levy is leviable under section 165. or

(3) 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.

“Specified circumstances” in relation to services to non resident by E-commerce operator means:

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.

Payment of Equalisation levy:

As per section 166A it has been stated that equalisation levy shall be paid by the E-commerce operator, and the same is clear from the language used in the section which is as under:

“The equalisation levy referred to in sub-section (1) of section 165A, shall be paid by even e-commerce operator to the credit of the Central Government for the quarter of the financial year ending with the date specified in column (2) of the Table below by the due date specified in the corresponding entry in column (3) of the said Table:”

and according to which “equalisation levy shall be paid by even e-commerce operator” which is a bit weird because an e-commerce operator who is not having any permanent establishment in India why would it adhere to the laws of such country rather the responsibility should have been of the person who is taking the service.

Due date for payment of equalisation levy would be 7th day of the month succeeding each quarter and in case of quarter ending March it would be 31st March.

Due date for filing return under equalisation levy is before 30th June for each financial year.

Interest and late fees:

Interest on delayed payment would be 1% per month or part of month.

Penalty could be an amount equal to equalisation levy.

Penalty for failure to furnish a statement would be Rs. 100 for each day.

Impact:

This would mainly impact e-commerce operator such as Alibaba and other such Chinese players who export goods in India but don’t have permanent establishment in India and this would in turn increase cost of the goods being sold.

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