Introduced in the Finance Act 2016, an “equalisation levy” at the rate of 6% (on the nonresident companies indulged in the digital advertisement space) sought to address the tax-related challenges by the growing digitization of the Indian economy. Effective from 1 April 2020, the scope has been widened to cover the levy of 2% on consideration received by Ecommerce operators from Ecommerce supply or services.
The provisions of equalisation levy are not a part of the income-tax law which means that the tax treaty benefits may not be available in relation to such levy.
Applicable on non-resident Ecommerce operators who own, operate or manages a digital or electronic facility or platform for the sale of goods or provision of services (or both) via an online medium.
The levy is applicable on Ecommerce supply or services including –
- Online sale of goods owned by the e-commerce operator.
- Online provision of services provided by the e-commerce operator.
- Online sale of goods facilitated by the e-commerce operator (via a platform for others to supply goods or services).
- Any combination of the above.
The levy will be applicable when the goods or services are facilitated to either a resident in India or to a person using an IP address located in India or to a non-resident (in respect of the sale of advertisements focussed at residents in India or using an IP address of/in India).
The equalisation levy shall not be charged when-
- The e-commerce operator has a permanent establishment in India and the e-commerce supply or services are effectively connected with such permanent establishment.
- The equalisation levy is leviable on an online advertisement and related activities; or
- The sales, turnover or the gross receipts of the e-commerce operator is less than Rs. 2 crores (INR 20 million) during the financial year.