Equalisation Levy – CHAPTER VIII IN THE FINANCE ACT, 2016
Introduction : Government vide finance act, 2016 inserted equalisation levy, it is necessary to know that when assessee is required to deduct, what will be the rate of deduction, and what are the other provisions relating to equalisation levy. Further there is also amendment which has been inserted last year, effect of which has resulted in widening the scope of equalisation levy.
Who is required to deduct equalisation levy?
If any person being resident in India or non-resident in India but having permanent establishment in India is paying any amount of consideration for specified service to person being non-resident in India and not having permanent establishment in India; than such payer will be required to deposit equalisation levy to the government.
What will be the rate of equalisation levy and whether there is any exception?
- The payer shall be carrying business or profession and payment made is in relation such business or profession.
- The amount of payment shall be exceeding Rs. 1,00,000/-.
- The rate of deduction will be 6% of Gross amount paid.
- The provision of equalisation levy will not be applicable to Jammu and Kashmir.
Which are the services which will attract above levy?
(i) Online advertisement service;
(ii)Any allowance for digital advertising space or any other service for the purpose of online advertisement;
will attract above levy. For the above purpose ‘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.
Whether assessee on whose account equalisation levy is deducted can avail Tax credit of such levy?
It has been specifically clarified by government that assessee shall note that the above levy is different from Income Tax, and therefore assessee will not be allowed with any credit of any amount deducted on his account as equalisation levy.
Whether will be treatment of Income in hands of person who has received it after deduction of equalisation levy?
If any person is in receipt of Income on which equalisation levy has been deducted than in such case, said receipt will be exempted in hands of recipient.
What is the amendment for widening the scope of equalisation levy?
From assessment year 2021-22, equalization levy at the rate of 2% (of gross amount of consideration) would be chargeable on consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it—
(1)to a person resident in India; or
(2)to a non-resident in the specified circumstances as provided below; or
(3)to a person who buys such goods or services or both using internet protocol address located in India.
(1) 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
(2) Sale of data, collected from a person who is resident in India or from a person who uses internet protocol address located in India.
Again, if such e-commerce operator has permanent establishment in India and service is connected with such permanent establishment; than there will be no equalisation levy.
Further, if above e-commerce operator has provided the service which attracts the levy under section 165 (mentioned in question no. 3) than equalisation levy will be deducted under that section.
Also, if 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 during the previous year than no equalisation levy will be deducted.
The rule, that amount of payment is exceeding Rs. 1,00,000/- and the consideration paid is in nature of business payment (i.e., transaction undertaken by person who is carrying business and profession) will be applicable to above amendment also.
Service to which amendment will be applicable:
- online sale of goods owned by the e-commerce operator; or
- online provision of services provided by the e-commerce operator; or
- online sale of goods or provision of services or both, facilitated by the e-commerce operator; or
- any combination of activities listed in (i), (ii) or (iii) above
Important point that is to be considered here is unlike above section 165 where the service recipient is required to deduct the levy, here the person who is receiving the consideration amount is liable to collect the levy and deposit the same to the government.
Within What time Equalisation levy is required to be deposited?
Such levy is required to be deposited by 7th of next month, from the month in which such levy is deducted. If it is the case of service which is relating to e-commerce operator (i.e., the service inserted by amendment) the date of payment will be for quarter ending on 30thJune, 7th July; for quarter ending on30thSeptember, 7thOctober; for quarter ending on 31st December, 7th January and for quarter ending on 31st March, 31st March.
Even in case if person has failed to deducted such levy than also, he will be liable to pay such amount from his own pocket.
In this part we have discussed the basics of equalisation levy, in the second and concluding part we will discuss the remaining provisions relating to equalisation levy.