Equalisation Levy (Amendment) Rules, 2020

Equalisation levy was introduced way back in 2016, vide the Finance Act, 2016, with the intention of taxing certain specified services. Recently, the Central Board of Direct Taxes, vide notification dated 28th October 2020, notified the Equalisation levy (Amendment) Rules, 2020. Basically, the rules are amended to include the equalisation levy on e-commerce transactions. The present article briefly explains the amendments undertaken vide the Equalisation levy (Amendment) Rules, 2020.

Highlights of Equalisation levy (Amendment) Rules, 2020-

The amendments are summarized hereunder-

Addition of definition of term ‘electronic verification code’-

Rule 2(aa) is inserted which covers the definition of ‘electronic verification code’. As per the definition ‘electronic verification code’ means- “A code generated for the purpose of the electronic verification of the person who is furnishing the statement of specified services as per the data structure/ standards laid down by the Director General of Income Tax (Systems) or the Principal Director General of Income Tax (Systems).”

Substitution of provisions relating to the payment of equalisation levy-

Provisions of rule 4 deals with the payment of equalisation levy. The entire rule 4 is substituted. Accordingly, the amended rule 4 provides as under-

The assesses/ e-commerce operator who is liable to deduct and pay the equalization levy shall pay the amount of such levy by remitting the amount, accompanied by an equalization levy challan, into-
- The Reserve Bank of India; or
- Any branch of the State Bank of India; or
- Any authorized Bank.

Substitution of provisions relating to the statement of specified services/ e-commerce supply or services-

Provisions of rule 5 are substituted. Accordingly, the amended rule 5 states as under-

The statement to be furnished as per section 167(1) or section 167(2) is to be filed in Form No. 1.
The assesses/ e-commerce operator can electronically furnish Form No. 1 in any of the following manners-
- Using digital signature; or
- Using electronic verification code.
Form No. 1 to be filed under section 167(1) should be furnished on or before 30th June immediately following the financial year.
The Director General of Income Tax (Systems) or the Principal Director General of Income Tax (Systems) shall for ensuring secure capture and transmission of data laid down-
- The process for electronic filing of Form No. 1.
- The data structure; manner and standards of a generation of the electronic verification code.
- The manner of furnishing the revised statement required to be furnished under section 167(2).
- Formulate and implement the appropriate security, retrieval and archival policies in relation to the form so furnished.

Amendment in provisions relating to form of appeal to Commissioner of Income Tax (Appeals)-

Provisions of rule 8 are amended as under-

An appeal under section 174(1) to the Commissioner of Income Tax (Appeals) shall be made in Form No. 3, electronically, in any of the following manners-
- Using digital signature; or
- Using electronic verification code.
The form of appeal will be verified by the person who is authorized to verify the statement under rule 5.
The document accompanying Form No. 3, electronically, can be furnished in any of the following manners-
- Using digital signature; or
- Using electronic verification code.
The Principal Director General of Income Tax (Systems) or the Director General of Income Tax (Systems) shall for ensuring secure capture and transmission of data-
- Lay down the process for electronic filing of Form No. 3.
- Formulating and implementing the appropriate retrieval, archival and security policies in relation to the form so furnished.
- Lay down the data structure; manner and standards of a generation of the electronic verification code.

List of forms substituted-

Form No. 1 – Statement of specified services/ e-commerce supply or services.
Form No. 3 – Appeal to the Commissioner of Income Tax (Appeals)
Form No. 4 – Appeal to the Appellate Tribunal.

Substitution of word ‘assessee’ with words ‘assessee or e-commerce operator’-

Under rule 7 and rule 9, the word ‘assessee’ is replaced with the words ‘assessee or e-commerce operator’.

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Frequently Asked Questions

Common questions about Equalisation Levy Rules 2020 Amendment Summary.

The Equalisation Levy (Amendment) Rules, 2020 is a notification issued by the Central Board of Direct Taxes that amends the existing rules related to the equalisation levy, which was introduced in 2016 to tax certain specified services. The amendments primarily aim to include the equalisation levy on e-commerce transactions.

An 'electronic verification code' is a code generated for the purpose of electronic verification of the person who is furnishing the statement of specified services or e-commerce supply or services. The data structure, standards, and manner of generating this code will be laid down by the Director General of Income Tax (Systems) or the Principal Director General of Income Tax (Systems).

Under the amended Rule 4, the equalisation levy can be paid by remitting the amount, accompanied by an equalisation levy challan, into the Reserve Bank of India, any branch of the State Bank of India, or any authorized bank.

As per the amended Rule 5, the statement of specified services or e-commerce supply or services (Form No. 1) can be electronically furnished using either a digital signature or an electronic verification code. The form must be filed by June 30th of the immediately following financial year.

The amendments have made changes to the appeal process. An appeal to the Commissioner of Income Tax (Appeals) under Section 174(1) must now be made electronically in Form No. 3, using either a digital signature or an electronic verification code. The accompanying documents can also be furnished electronically using the same methods.

The substitution of the word 'assessee' with 'assessee or e-commerce operator' in Rules 7 and 9 is to include e-commerce operators within the scope of the equalisation levy rules, in line with the amendments introducing the levy on e-commerce transactions.

The new forms introduced under the Equalisation Levy (Amendment) Rules, 2020, are Form No. 1 (Statement of specified services or e-commerce supply or services), Form No. 3 (Appeal to the Commissioner of Income Tax (Appeals)), and Form No. 4 (Appeal to the Appellate Tribunal).

The Director General of Income Tax (Systems) or the Principal Director General of Income Tax (Systems) will lay down the process for electronic filing of Form No. 1 and Form No. 3, as well as the data structure, manner, and standards for generating the electronic verification code. They will also formulate and implement appropriate security, retrieval, and archival policies for the electronically furnished forms.

The introduction of the equalisation levy on e-commerce transactions aims to tax the income accruing to non-resident e-commerce operators from the supply of goods or services facilitated by or through their digital platforms in India. This is in line with the government's efforts to tax the digital economy.

The article does not explicitly mention the effective date of the amendments introduced by the Equalisation Levy (Amendment) Rules, 2020. However, since the notification was issued on October 28, 2020, it is likely that the amendments will come into effect soon after that date or from a specified date mentioned in the notification.