What does mean equalisation levy?

What does mean equalisation levy?

Economy

  • EL 2.0 was made effective on April 1, 2020.
  • The new levy now includes a 2 per cent tax on gross revenues received by a non-resident “e-commerce operator” from the provision of ‘e-commerce supply or service’ to Indian residents or non-resident companies having a permanent establishment in India.
  • The expression ‘e-commerce supply or service’, inter alia, includes the online sale of goods or the online provision of services or facilitation of the online sale of goods or provision of services.
  • Any foreign company providing services/goods in India through a digital platform could be within the scope of the levy.
  • Consider a situation where an Indian buyer places an order for the purchase of goods through offline/physical mode with a non-resident e-commerce operator.
  • The goods are also delivered by the non-resident physically to the Indian buyer. The Indian buyer merely makes an online payment for the same.
  • Given the expanded definition of ‘online sale of goods’, a mere payment that is made through an online mode can potentially be subject to the transaction to equalisation levy.
  • The provisions of EL 2.0 are so widely worded, amenable to interpretation to cover the sale of physical goods as also services enjoyed offline.
  • Illustratively, while many businesses negotiate supply and service agreements online and use electronic means for confirming contracts, the delivery of goods and/or services is largely offline.
  • Further, pure traditional brick and mortar businesses that use a fair degree of digitisation, (website, digital payments) may also come under the net of EL 2.0.