How the Equalisation Levy is changing all the game?

Extent

Equalisation Levy is covered under Chapter VIII and it extends to the whole of India except the state of Jammu and Kashmir.

Application

This chapter applies to the consideration received or receivable for specified services. It is to be noted that the consideration received or receivable only after the commencement of this chapter comes under the ambit of this chapter. i.e 01.04.2020

Definitions

Some of the definitions relevant under this chapter are as follows:

E-commerce operator: a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both.

E-commerce supply or services:

online sale of goods.
online provision of services.
online sale of goods or provision of services or both.
any combination of activities listed above.

Equalisation levy: tax leviable on consideration received or receivable for any specified service or e-commerce supply of services.

Online: 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.

Permanent establishment: includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.

Specified service: online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government.

In the case of Specified Services:

Rate of Equalisation Levy

The rate of Equalisation Levy is 6% on the specified services.

On what amount such levy is to be charged in case of specified services?

The Equalisation levy is to be charged on the amount of consideration for any specified service received or receivable. This means that the Equalisation Levy is charged on an accrual basis.

There are two scenarios:

Scenario 1:

The recipient of the specified services is a non-resident; and
A provider is a resident person in India carrying on business or profession.

Scenario 2:

The recipient of the specified services is a non-resident; and
The provider is a non-resident having a permanent establishment in India.

When such levy is not to be charged in case of specified services?

The Equalisation levy is not to be charged in the following cases:

Scenario 1:

The provider is a non-resident having a permanent establishment in India; and
The specified service is effectively connected with such a permanent establishment.

Scenario 2:

Where consideration is up to 1 lakh rupees.

Scenario 3:

Where the payment has been made other than for the purposes of carrying out business or profession.

It is to be noted that all the scenarios are mutually exclusive to each other.

In the case of E-commerce supply of Services:

Rate of Equalisation Levy

The rate of Equalisation Levy is 2% on the E-commerce supply of services.

On what amount such levy is to be charged in case of E-commerce supply of services?

The Equalisation levy is to be charged on the amount of consideration received or receivable. This means that the Equalisation Levy is charged on an accrual basis.

There are three scenarios:

Scenario 1:

The provider is an e-commerce operator; and
The recipient is a person resident in India.

Scenario 2:

The provider is an e-commerce operator; and
The recipient is a non-resident in the following cases-

sale of advertisement, which targets customer resident in India; or
sale of advertisement, which targets a customer, who accesses the advertisement though an internet protocol address located in India;

and

sale of data, collected from a person who is resident in India; or
sale of data, collected from a person who uses an internet protocol address located in India.

Scenario 3:

The provider is an e-commerce operator; and
A recipient is a person who buys such goods or services or both using an internet protocol address located in India.

When such levy is not to be charged in case of E-commerce supply of services?

The Equalisation levy is not to be charged in the following cases:

Scenario 1:

The e-commerce operator making or providing or facilitating e-commerce supply or services has a permanent establishment in India; and
The Service is effectively connected with such a permanent establishment.

Scenario 2:

The equalisation levy is leviable on specified services @ 6%.

Scenario 3:

The sales, turnover or gross receipts is less than two crore rupees during the previous year.

When the Equalisation levy is to be credited to the Central Government in case of specified services?

The equalisation levy is deducted during the calendar month. Such a levy shall be credited to the Central Government on or before the 7^th of the month immediately following the calendar month in which the levy has been deducted.

When the Equalisation levy is to be credited to the Central Government in case of E-commerce supply of services?

The equalisation levy shall be credited to the Central Government as below:

For the quarter ending on 30^th June, 7^th July;
For the quarter ending on 30^th September, 7^th October;
For the quarter ending on 31^st December, 7^th January;
For the quarter ending on 31^st March, 31^st

Interest on delayed payment of equalisation levy

Failure to credit the Central Government within the specified period attracts a simple interest @ 1% for every month or part thereof.

Penalty for failure to deduct equalisation levy

Failure to deduct the levy attracts a penalty equal to the amount of levy failed to be deducted in addition to the levy or interest if any.

Penalty for failure to pay equalization levy

Failure to pay the levy attracts a penalty equal to the amount of levy failed to be paid in addition to the

levy or interest, if any.

Penalty when levy has been properly deducted but failed to be paid

This attracts a penalty as follows:

Levy itself;
Interest, if any;
1000 rupees per day for the period of failure;

It is to be noted that the maximum amount of the penalty is the amount of levy itself.