ARTICLE ON EQUALISATION LEVY : UPDATED AS PER FINANCE BILL, 2020

Due to the corona virus pandemic, the whole country has been locked down but our knowledge and inquisitiveness are not. And we can utilize this time in enhancing our knowledge and thus, making it productive.

And as the saying goes “the more we learn, the better we become.”

Here is an article on Equalisation Levy, which includes updates as per Amended Finance Bill, 2020.

What is Equalisation Levy ?

  • It is a kind of tax to be deposited to the government by :
    • a person resident in India and carrying on Business or Profession; or
    • a Non-resident having a permanent establishment in India.




For making payment to Non-resident for receiving a service of an online advertisement or any provision of digital advertisement space or any other facility or service for the purpose of online advertisement, @6% of the amount of consideration.

For better understanding, let’s take an example :

Say X, a person resident in India carrying out business, takes online advertisement services from Facebook (which does not have any permanent establishment in India), for promoting his business for an amount say Rs. 1,50,000 for a year. Then, for the payment to be made by X to Facebook, tax @6% on Rs 1,50,000, i.e. Rs. 9,000 has to be deducted by X, and the same has to be deposited to the government.

Now, coming to the recent update on equalization levy, as per our Honorable Finance Minister’s speech for widening the scope of taxing digital companies, the amended Finance Bill, 2020 proposes to expand the scope of the equalisation levy, from non-resident providing online advertisement services or digital advertisement space or any other facility or service for the purpose of online advertisement, to e-commerce operators at the rate of 2% (to be paid by e-commerce operators, on a quarterly basis) for payments made on or after 1st April, 2020.

When this amendment is applicable :

If the e-commerce supply or services are made or facilitated on or after 1st April, 2020, by a non-resident e-commerce operator to :

(i.) a person resident in India, or

(ii.) to a non-resident (in respect of sale of ads targeted at residents of India, or persons using an IP address in India), or

(iii.) to a person who buys such goods or services or both using IP address located in India.

When equalisation levy and this amendment are not applicable :

(i.) The Non-resident providing specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment.

(ii.) The aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident, from a person resident in India and carrying on business or profession; or from a non-resident having a permanent establishment in India, does not exceed Rs 1 Lakh.

(iii.) Where the payment for the specified service is not for the purpose of carrying out business or profession.

(iv.) Where the gross receipts or turnover in respect of goods sold or services provided to residents, non-residents and persons using IP addresses in India is less than Rs 2 Crore in a year.

An electronic commerce operator (or simply e-commerce operator) means 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 means :

(i.) Online sale of goods owned by the ecommerce operator or

(ii.) Online provision of services provided by the e-commerce operator or

(iii.) Online sale of goods or provision of services or both facilitated by the e-commerce operator or any combination of the above activities.

Some important points of equalisation levy :

(i.) Equalisation levy deducted shall be deposited to Central government upto 7th of next month. However now Government has extended due dates for payments to 30th June, 2020.

(ii.) However, if any person fails to deduct equalisation levy then also he is liable to pay levy to the government for which a penalty is levied. But due to the pandemic, Government has waived of the penalty for delay during this period for payments from 20th March, 2020 to 30th June, 2020.



(iii.) Interest @1% per month or part of the month is applicable on late deposit of levy. However, for the payments made during the period 20th March,2020 to 30th June, 2020, interest rate has been reduced to 9% per annum instead of 12% per annum.

(iv.) Every assessee has to file return in FORM NO. 1 on or before 30th June of immediately following financial year.

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AUTHOR : SHALINI PASSI (CLICK HERE TO VIEW PROFILE)