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‘Equalisation levy for digital e-commerce transactions’, Retail News, ET Retail

'Equalisation levy for digital e-commerce transactions' NEW DELHI: Foreign-owned e-commerce players will have to pay equalisation levy from the next fiscal. The levy, which hitherto was applicable only to digital advertising players such as Google, has now been expanded by way of a sweeping amendment to cover all sorts of digital e-commerce transactions into India, as well as those transactions which use Indian data.

Rakesh Jariwala, Tax Partner – Technology, Media & Entertainment, and Telecom practice, EY said: “This could potentially cover all digital business earning more than Rs 2 crore of revenues from India or using Indian data to tax them at 2%. E-commerce operator will not have recourse to favourable tax treaty provisions. Unlike the earlier levy (on advertising), now the foreign e-commerce operator will be required to make compliances in India which could also raise potential challenges.”

The Finance Bill 2020 or Money Bill was passed in the Parliament on March 23. In a surprising development, the scope of equalisation levy has been extended to cover “e-commerce supply or services” (including facilitation) from April 1, 2020.

“One can also expect legal challenges on extra-territoriality as the provisions seeks to cover non-resident to non-resident transactions which use India data where OECD is still developing consensus on taxable nexus and allocation of taxing rights,” he added

The applicable tax rate is 2% (plus a surcharge) on amount of consideration received/receivable by an e-commerce operator.

Unlike equalisation levy in case of advertisement and related services, compliance obligation in this case is on the e-commerce operator (non-resident) and is required to deposit equalisation levy so collected on a quarterly basis and also file an annual return.

The provisions relating to income on which equalisation levy has been paid being exempt from income tax (I-T) continue to apply to e-commerce supplies on which equalisation levy has been paid, unless e-commerce operator has a PE (permanent establishment) in India and services so supplied are effectively connected to such PE.

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