Equalisation levy was introduced in the year 2016 for taxing the digital transactions on the income accruing to foreign e-commerce companies from India. The imposition will be applicable if the amount of consideration for the same exceeds the value prescribed by the Income Tax Department.
Equalisation levy is a direct tax withheld by the service recipient while making the payment. It is applicable for an Indian resident who is carrying on any business or profession, or a non-resident who holds a permanent establishment in India, if:
- The payment has been made to a non-resident service provider.
- The annual remittances made to one service provider is more than Rs.1 lakh in a financial year.
The provision will not be applicable if:
- The concerned non-resident provider has a permanent establishment in India, and the specified service is connected with such permanent establishment.
- The specified service is not meant for the pursuit of business or profession.
- The aggregate sum of consideration payable for the specified service received or receivable is within Rs.1 lakh.
The following services are now covered under this provision:
- Online advertisement.
- Provision for digital advertising space or facilities/service for online advertisement.
The tax rate currently affixed for this purpose is 6% of the gross consideration to be paid.
Collection and Recovery
As per Section 166 of the Income Tax Act, any person who is responsible for deducting the equalisation levy must deduct the equalisation levy and remit the deducted amount to Governmental accounts. This must be done in a span of 7 days from the end of the month of deduction.
Due Dates of Filing Statement
The due date of furnishing Equalisation Levy Statement, which must be done in Form-1, is on or before the 30th June of every Financial Year. Statements filed by the taxpayer will be processed to validate the accuracy of the statement and determine the sum payable in terms of interest, refund or otherwise. Post the completion of the process, the taxpayer will receive an intimation concerning the sum payable and refund due to the taxpayer.
Delayed payments will lead to an interest of 1% of the outstanding levy for every month or part thereof. Non-compliance on behalf of the service recipient will impose the following penalties on taxpayer:
- Non-deduction of equalisation levy – will attract a penalty that is equal to the sum of money failed to be deducted, along with interest and deposits of the outstanding principal levy.
- Equalisation levy deducted but not deposited – a penalty of up to Rs.1,000 per day, subject to the maximum levy that is not deducted.
- Disallowance of expenditures in the hands of the payer, except if the defect is rectified.
- Penalty for filing the statement of compliance will result in a penalty of Rs.100 per day for each day of non-compliance.
- Filing a false statement would force the defaulter to face imprisonment of up two-three years, supported with a fine.
Taxpayers have the option of making appeals to the Commissioner of Income-tax (Appeals) within 30 days from receiving the order. The appeal must be supported with a fee of Rs.1000. Appeals can be filed to the Tribunal if he/she is not satisfied with the outcome of the previous appeal. This must be done within 60 days of the previous order. As is the case with the initial appeal, a fee of Rs.1000 would be applicable.