Equalisation Levy - Most Vital Concept in International Taxation

Venkat Raj | Last updated: 29 December 2020

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The Equalisation Levy is a crucial concept in international taxation, introduced to ensure non-residents operating in India without a permanent establishment contribute to tax revenue. Initially targeting digital advertising services, its scope was expanded by the Finance Act 2020 to include e-commerce operators selling goods or services to Indian residents or users accessing services via Indian IP addresses. The levy is applied at different rates depending on the service and transaction value, with specific exemptions and rules for deduction.

This is perhaps the most vital concept in international taxation. Finance Act 2016 has brought a key change in the scope of international taxation. Finance Act 2020 has further expanded the scope of equalisation levy. This concept was introduced to catch hold of several non-residents who do not h

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FAQ :

The Equalisation Levy is a key concept in international taxation introduced to tax non-residents who conduct business in India but do not have a permanent establishment there, particularly e-commerce operators. It aims to ensure these entities contribute to tax revenue.

The Equalisation Levy applies when a non-resident receives consideration from a resident in India, or from another non-resident who has a permanent establishment in India, for specified services or e-commerce supplies.

For specified services like online advertisement, the Equalisation Levy is levied at 6% on the transaction value. The responsibility for deducting this levy lies with the payer.

The Finance Act 2020 expanded the scope to include e-commerce operators providing goods or services to persons resident in India, non-residents in India, or individuals using an Indian IP address. For these transactions, the levy is generally 2%.

Yes, the Equalisation Levy is not applicable if the total transaction value does not exceed 1 lakh for one financial year, or if the transaction is for personal purposes. It also does not apply if the non-resident rendering services has a permanent establishment in India, or for e-commerce operators if they have a permanent establishment in India.

Yes, the Equalisation Levy is charged irrespective of any Double Taxation Avoidance Agreement (DTAA) or other suitable provisions under the Act.