What is Equalisation Levy ?
- Equalization Levy (EL) is a tax leviable on consideration received by a non-resident for specified services.
- This specified service includes
- Online advertising
- Provision of digital space for online advertisement
- Any other service for purpose of online advertising
Imposition of Tax
- Indian Government introduced Equalization Levy vide Finance Bill, 2016, with the intention of taxing the digital transactions.
- It is imposed under the Finance Act 2016 and not as a part of the Indian Income Tax Act, 1961.
- Section 165 of this Act says that a person resident in India or a non-resident having a permanent establishment in India shall deduct EL at 6% on the consideration paid to non-resident towards specified services.
How much tax imposed under FA 2016?
- The threshold limit attracting equalization is Rs 1 Lakhs.
- Equalization Levy is charged at the rate of 6% on the amount of consideration received/receivable by the non-resident.
Equalisation Levy 2.0
- Indian Government introduced the Finance Act, 2020 which expanded the scope of the EL to include all non-resident e-commerce operators providing ‘e-commerce supply or services.
- The threshold limit attracting equalization 2.0 is Rs 2 Crores.
- EL 2.0 is charged at the rate of 2% on the amount of consideration received/receivable by the non-resident.
- E-Commerce operator means a non-resident, who owns, operates, or manages a digital platform or electronic facility for online sale of goods or online provision of services, or both.
Finance Act 2021
- The Finance Act 2021 inserted a clause under Section 164 of Finance Act 2016
- It is clarified that e-commerce supply shall include one or more following activities undertaken online
- Acceptance of offer for sale
- Placing of purchase order
- Acceptance of purchase order
- Payment of consideration
- Supply of goods or provision of services, partly or wholly.