India has taken its first major step towards taxing digital economy transactions. Finance minister in his budget for fiscal 2016-17 had announced the introduction of ‘Equalization Levy’, to tax the e-commerce transactions / digital business conducted across national borders.
Recently, CBDT has issued a circular bringing in details of the levy with regards to payment, statement of specified services required to be furnished, time limits, demand notice and appeal to Commissioner of Income-tax in case of any disputes
Here is quick glance at the new scheme:
What is equalization levy:
- Equalization levy is a tax levied on consideration or payment received or receivable exceeding Rs. 1 Lakh for any specified services like online advertisements / digital advertisements across borders.
- With effect from 1st June, 2016 at a rate of 6% of the payment received or receivable.
To whom its applicable:
- Payments made by
- a person resident in India and carrying on business or profession; or
- a non-resident having permanent establishment in India
- Payments made to Non-resident not having Permanent Establishment (“PE”) in India
- Towards specified services i.e, online advertisements/digital advertisements
Deduction & Payment of Equalization levy:
- Person making the payment need to deduct the equalization levy from the amount paid/payable and deposit to the Central Government account
- The amount so deducted to be deposited within 7th of the following calendar month through equalization levy challan
Exclusions: Equalization levy will not be applicable in below cases:
- Payments to a particular Non-Resident is less than Rs 1 lakh
- Payment for specified service is not for Business/Profession
- Payments to Non-resident having a permanent establishment in India
Filing Statement of Equalisation Levy (Form1):
- A return has to be filed after the end of the Financial Year in Form 1 on or before 30th June immediately following the Financial Year.
- Return can be furnished
- Electronically under digital signature; or
- Electronically through electronic verification code
- Provision for revised return within 2 years from the end of the financial year in which the specified service was provided
- In case payer fails to deduct levy and deposit to the Central Government within stipulated time, 30% of the expenditure will be disallowed while computing total Income of the payer.
- Interest on delayed payment @ 1% applicable for every month or part of the month.
- Penalty for failure to deduct or pay equalization levy will be as follows:
|Failure to deduct||An amount equal to equalization levy|
|Amount deducted but not paid into the credit of the Central Government||Rs 1000 per day during which failure continues, provided it doesn’t exceed the equalization levy|
|Failure to furnish statement||Rs 100 per day during the period in which failure continues|