Equalization levy
This query is : Resolved
07 January 2017
Hello All,
The Govt introduced Equalization levy on Advertizement Service received from Foreign Resident. Since Foreign entity does not allow you to deduct any amount from the service charge or mention it in the contract that all local taxes and fee shall be born by the service receiver.
So the receiver needs to deposit 6% equalisation levy from his own pocket. The foreign entity issues the receipt/bill for the amount it receives.
The problems are: -
1)How to treat it in the books of account?
2) Since we are not deducting said levy from the service charge, will it be allowed as an expense under IT Act?
3) How should it be calculated i.e. straightly applying 6% on said service charge or applying the concept of grossing up? (although there is a problem with grossing up concept which is, the amount mentioned in the bill/receipt.)
The Govt introduced Equalization levy on Advertizement Service received from Foreign Resident. Since Foreign entity does not allow you to deduct any amount from the service charge or mention it in the contract that all local taxes and fee shall be born by the service receiver.
So the receiver needs to deposit 6% equalisation levy from his own pocket. The foreign entity issues the receipt/bill for the amount it receives.
The problems are: -
1)How to treat it in the books of account?
2) Since we are not deducting said levy from the service charge, will it be allowed as an expense under IT Act?
3) How should it be calculated i.e. straightly applying 6% on said service charge or applying the concept of grossing up? (although there is a problem with grossing up concept which is, the amount mentioned in the bill/receipt.)
07 January 2017
1. Same treatment of a payment attracting TDS..
2. Deduction is warranted in view of the above observation. Question of an expense doesn't arise since deduction is squared up on payment to Govt.
3. 6% straight on service charge.
2. Deduction is warranted in view of the above observation. Question of an expense doesn't arise since deduction is squared up on payment to Govt.
3. 6% straight on service charge.
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