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Introduction of Equalisation Levy in India was back in 2016, with the intention of taxing the digital transactions i.e. the income accruing to foreign e-commerce companies from India. It is aimed at taxing business to business transactions.

In what case Equalisation Levy is applicable

Equalisation Levy is a direct tax, which is withheld at the time of payment by the service recipient.

The two conditions to be met to be liable to equalisation levy are:

  • The payment should be made to a non-resident service provider;
  • The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.

What are the services covered under Equalisation Levy?

The following services are covered under the ambit of Equalisation Levy:

  • Online advertisement
  • Any provision for digital advertising space or facilities/ service for the purpose of online advertisement
Equalisation Levy   An Analysis

What is the rate of tax to be taken under Equalisation Levy?

The applicable rate of tax is 6% of the gross consideration to be paid.

What is the Due Date applicable for Compliance?

Due date of furnishing Equalisation Levy Statement (Form-1) is on or before 30th June of Financial Year ended. This is said to be the annual statement.

What are the consequences if the payments are delayed?

Interest is charged at the rate of 1% of the outstanding levy for every month or part thereof is delayed.

In case there is non-compliance on behalf of the service recipient -

The compliance procedure for the Equalisation Levy is the responsibility of the service recipient in the following way -

 

If there is a Penalty for failure of payment

  • If Equalisation Levy is not deducted: Penalty equal to the amount of levy failed to be deducted (along with interest and depositing of the principal levy outstanding).
  • Equalisation Levy deducted but not deposited: Penalty equal to INR 1,000/day subject to the maximum of the levy failed to be deducted (along with interest and depositing of the principal levy outstanding).
  • Disallowance of such expenditure in the hands of the payer (unless the defect is rectified).

If there is a Penalty for failure of filing statement of compliance

  • INR 100/day for each day the non-compliance continues.
 

In case of Prosecution

  • If a false statement has been filed then the person may be subjected to imprisonment of a term up to 3 years and a fine.
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