Equalisation Levy

Question 1

What is the basic meaning of Equalisation levy as per the provisions of section 164(d) of the Finance Act, 2016?

Answer 1

Equalisation levy means the tax leviable on consideration received or receivable for any specified service or e-commerce supply or services.

Question 2

When does an Equalisation charge or levy on specified services become effective as per Section 165 of Finance Act, 2016?

Answer 2

Equalisation levy @6% is leviable on the amount of consideration for specified service received or receivable by a person, being a non-resident from -

(a) a person resident in India and carrying on business or profession; or
(b) a non-resident having a PE in India.

Question 3

When does the Equalisation levy not chargeable as per the provisions of section 165 for specified services?

Answer 3

(a) the non-resident providing the specified service has a PE in India and the specified service is effectively connected with such PE;
(b) 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 PE in India, does not exceed ` 1 lakh; or
(c) where the payment for the specified service by the person resident in India, or the PE in India is not for the purposes of carrying out business or profession.

Question 4

What is the charge or levy of equalisation levy as per the provisions of section 165A - E-Commerce supply of services?

Answer 4

From A.Y.2021-22, equalization levy@2% would be chargeable on the amount of consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it—

(1) to a person resident in India; or
(2) to a non-resident in the specified circumstances as provided below; or
(3) to a person who buys such goods or services or both using internet protocol address located in India.

Question 5

When equalisation levy is not chargeable as per the provisions of section 165A relating to the E-commerce operator?

Answer 5

• where the e-commerce operator making or providing or facilitating e-commerce supply or services has a permanent establishment in India and such e-commerce supply or services is effectively connected with such PE;
• where the equalization levy is leviable under section 165; or
  
  • sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated is less than ` 2 crore during the previous year.

Question 6

What is the meaning of “a non-resident in the specified circumstances” as per the provisions of section 165A for coverage under the levy?

Answer 6

(1) sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though internet protocol address located in India; and
(2) sale of data, collected from a person who is resident in India or from a person who uses internet protocol address located in India.

Question 7

What is the meaning of specified services as mentioned in the section 165 of the act?

Answer 7

i) Online advertisement;
(ii) Any provision for digital advertising space or any other facility or service for the purpose of online advertisement;
(iii) Any other service as may be notified by the Central Government.
Note – ‘Online’ means a facility or service or right or benefit or access that is obtained through the internet or any other form of digital or telecommunication network.

Question 8

What is the meaning of E-commerce operator as per the provisions of section 165A of the act?

Answer 8

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

Question 9

What is the meaning of E-commerce supply or service as per the provisions of section 165A?

Answer 9

(i) online sale of goods owned by the e-commerce 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
(iv) any combination of activities listed in (i), (ii) or (iii) above

Question 10

Who is the person responsible for deduction of equalisation levy under section 164 - for specified services?

Answer 10

Every person, being a resident and carrying on business or profession or a non-resident having a permanent establishment in India shall deduct equalisation levy referred to in section 165(1) from the amount paid or payable to a non-resident in respect of the specified service

Question 11

What is the Time period for remittance of equalisation levy as per Section 166?

Answer 11

The equalisation levy so deducted during any calendar month shall be paid by every assessee to the credit of the Central Government by the 7th of the month immediately following the said calendar month.

The assessee who is required to deduct and pay equalisation levy, shall pay the amount of such levy, by remitting it into the Reserve Bank of India or in any branch of the State Bank of India or of any authorised Bank accompanied by an equalisation levy challan.

Question 12

What are the consequences of failure to deduct equalisation levy as per section 166?

Answer 12

Thus, if the assessee responsible for deducting equalisation levy, fails to so deduct, he has, in any case, to pay such levy to the credit of the Central Government by the 7th of the month immediately following the said calendar month.

Question 13

What is the Time period for remittance of equalisation levy as per Section 166A - Relating to E-commerce?

Answer 13

Question 14

What are the requirements for furnishing of a statement in a prescribed form under section 167? and what are the time limits within which the statement has to be furnished?

Answer 14

The statement in respect of all specified services/E-Commerce Supply or services, as the case may be, chargeable to equalisation levy during any financial year is required to be furnished electronically under digital signature or electronically through electronic verification code in Form No. 1, duly verified, on or before 30th June immediately following that financial year

Question 15

What is the time limit for filing of revised statement as per Section 167?

Answer 15

Such statement or revised statement has to be filed at any time before the expiry of two years from the end of the financial year in which the specified service was provided, or e-commerce supply or services was made or provided or facilitated.

Question 16

What is the Time limit for filing a statement in response to notice issued by the Assessing Officer as per section 167?

Answer 16

The Assessing Officer has been empowered to issue notice for furnishing such statement, which then has to be furnished, within 30 days from date of serving of such notice [Rule 6 of Equalisation Levy Rules, 2016]

Question 17

What is the manner of processing of the statement furnished as per section 167 and sending of any intimation by the AO - as per section 168?

Answer 17

Question 18

what is the prescribed form for service of notice of demand on the assessee/ E-Commerce Operator as per section 168?

Answer 18

Where any levy, interest or penalty is payable under the equalisation levy provisions, a notice of demand in Form No. 2 specifying the sum so payable shall be served upon the assessee or E-Commerce Operator, as the case may be.
Further, intimation issued upon processing of the statement or revised statement shall also be deemed to be a notice of demand [Rule 7 of Equalisation Levy Rules, 2016]

Question 19

What is the time limit for amending the intimation provided by the AO under section 168? - as per section 169?

Answer 19

With a view to rectifying any mistake apparent from the record, the Assessing Officer may amend any intimation issued under section 168.
Such intimation can be amended within one year from the end of the financial year in which the intimation sought to be amended was issued

Question 20

When a reasonable opportunity of being heard to be given when the AO is amending the intimation under section 169?

Answer 20

An amendment to any intimation, which has the effect of increasing the liability of the assessee or E-Commerce operator or reducing a refund, shall not be made unless the Assessing Officer has given notice to the assessee or E-Commerce operator of his intention so to do and has given the assessee or E-Commerce operator a reasonable opportunity of being heard.

Question 21

What is the requirement for payment of interest when the assessee or E-com operator fails to pay the levy to the credit of the CG within the given time limit?

Answer 21

An assessee or E-Commerce operator who fails to credit the equalisation levy or any part thereof within the period specified u/s 166 or 166A, to the account of the Central Government, has to pay simple interest at the rate of 1% of such levy for every month or part of a month by which such crediting of the tax or any part thereof is delayed.

Question 22

What is the penalty(in addition to the interest) that is levied for failure to deduct or pay the Equalisation levy to the credit of CG as per section 171?

Answer 22

Question 23

What is the penalty for the failure to furnish statement as per section 172?

Answer 23

For failure to furnish the statement within 30th June of the immediately following year or within 30 days from the date of service of notice by the Assessing Officer, penalty of ` 100 for each day during which the failure continues is leviable.

Question 24

What are the circumstances in which an appeal can be made to the CIT(Appeals) as per the provisions of section 174?

Answer 24

An assessee or E-Commerce operator aggrieved by an order imposing penalty under this Chapter, may appeal to the Commissioner of Income-tax (Appeals) within a period of 30 days from the date of receipt of the order of the Assessing Officer

An appeal shall be in the prescribed form [Form 3] and verified in the prescribed manner. It shall be accompanied by a fee of ` 1,000.

It may be filed electronically under digital signature or electronically through EVC. Any document accompanying Form No.3

Where an appeal has been filed, the provisions of sections 249 to 251 of the Income-tax Act, 1961 would, as far as may be, apply to such appeal

Question 25

What are the provisions of appeal to the appellate tribunal as per the provisions of section 175?

Answer 25

An assessee or E-Commerce operator aggrieved by an order made by the Commissioner of Income-tax (Appeals) under section 174 may appeal to the Appellate Tribunal against such order(or Commissioner of Income tax, if he objects to the order passed by the CIT(Appeals) direct the AO to file the appeal)

An appeal shall be filed within 60 days from the date on which the order sought to be appealed against is received by the assessee or E-Commerce operator or by the Commissioner of Income-tax, as the case may be.

The appeal shall be in the prescribed form [Form No.4] and verified in the prescribed manner.

In the case of an appeal filed by an assessee or E-commerce operator, it shall be accompanied by a fee of ` 1,000

Question 26

What is the punishment for making a false statement as per section 176?

Answer 26

If a person -
(a) makes a false statement in any verification under this Chapter or any rule made thereunder; or
(b) delivers an account or statement, which is false, and which he either knows or believes to be false, or does not believe to be true,
he shall be punishable with imprisonment for a term which may extend to three years and with fine.

Question 27

What are some relevant provisions in the Income tax act, 1961 which goes hand in hand with the equalisation levy provisions?

Section 9(1)(i)

Answer 27

provides that in case of a business of which all the operations are not carried out in India, the income deemed to accrue or arise in India would only be such part of the income as is reasonably attributable to the operations carried out in India.

• *Explanation 3A** has been inserted w.e.f. A.Y.2021-22 to provide that income attributable to the operations carried out in India would include income from –
  (i) such advertisement which targets a customer who resides in India or who accesses the advertisement through internet protocol address (IPA) located in India;
  (ii) sale of data collected from a person who resides in India or from a person who uses IPA located in India; and
  (iii) sale of goods or services using data collected from a person who resides in India or from a person who uses IPA located in India.

The above provision broadens the scope of ‘income attributable to the operations carried out in India” and brings within the tax net, the above specified incomes

Question 28

What are some relevant provisions in the Income tax act, 1961 which goes hand in hand with the equalisation levy provisions?

Section 10(50)

Answer 28

section 10(50) exempts any income arising from providing any specified service on or after the date on which the provisions of Chapter VIII of the Finance Act, 2016 comes into force, or arising from any e-commerce supply or services made or provided or facilitated on or after 1.4.2021 and chargeable to equalisation levy under that Chapter.

Therefore, exemption under section 10(50) is available in respect of amounts which have been subjected Equalisation Levy.

Therefore, from a plain reading, it appears that the benefit of exemption under section 10(50) would not be available for e-commerce supply or service made or provided or facilitated between 1st April, 2020 and 31st March, 2021

Consequently, there may be a possibility of such amount being subject to tax twice in the P.Y.2020-21 i.e., it is possible that the amount may be subject to Equalisation Levy as well as income-tax under the Income-tax Act, 1961

Question 29

What are some relevant provisions in the Income tax act, 1961 which goes hand in hand with the equalisation levy provisions?

Section 40(a)(ib)?

Answer 29

if any consideration is paid or payable to a non-resident for a specified service on which equalisation levy is deductible, and such levy has not been deducted or after deduction, has not been paid on or before the due date under section 139(1), then, such expenses incurred by the assessee towards consideration for specified service shall not be allowed as deduction.

The disallowance would be attracted only in the case of equalization levy on specified services, where the onus is on the service recipient to deduct the equalization levy.

Further the disallowance is 100% of the consideration paid or payable to a non-resident for specified service and not restricted to 30%, as under section 40(a)(ia).

Question 30

What are some relevant provisions in the Income tax act, 1961 which goes hand in hand with the equalisation levy provisions?

Section 194-O?

Answer 30

platform, such e-commerce operator is liable to deduct tax at source @1% of the gross amount of such sales or services or both, at the time of credit of amount of such sale or services or both to the account an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier.

However, no tax is required to be deducted under section 194-O in case of any sum credited or paid to an e-commerce participant, being an individual or HUF, where the gross amount of such sale or services or both during the previous year does not exceed ` 5 lakh.

and such e-commerce participant has furnished his PAN/ Aadhaar number to e-commerce operator.

Pandemic rate - 1% to 0.75%

Question 31

Summary chart for the entire chapter(based on the points already noted)?

Answer 31

Question 32

Summary chart for the entire chapter(based on the points already noted)?

Answer 32