Equilisation levy

TDS 168 views 3 replies

Mayur Chitnis

Sr. Executive - Agency finance

23 Points Joined November 2017

Hi,

As everybody know that government has launched an Equalisation levy act on advertising services since Jun'16.

Law says advertising service consumer based in India should to deduct 6% Levy on total invoice and make payment to service provider based outside india. However, company's like Google does not permit to do this as they have an agreement saying that all the Laws and Regulations pertaining to a country are to be followed by the service consumer. In this case government has said that service taker should bear this cost.

My Question is :- If my company is ready to bear the levy what will be the calculation to make levy payment to Government?

While making payment to foreign entity we need to fill 15 Ca Cb forms and also some other forms, where we have to mention amount paid and TDS deducted(deduction of levy is considered as TDS).

Here is an example :-

Rs. 10,00,000.00 payable to Google

In ideal situation we should be deducting Rs. 60,000.00 and making a payment of Rs, 9,40,000.00 to Google and Rs. 60,000.00 to government. However as Google is not ready to except this law. We are making a payment of Rs, 10,00,000.00 to Google Grossing up amount by adding 6% which comes to 10,60,000.00 and then make a payment of Rs. 63,600.00 to governement.Which i think is not the right way.

I think if google is not accepting the levy and we are ready to bear the levy any ways we should be paying Rs. 60,000,.00 to goverment and not more than that.

Need your expert opinion and guidance on this and most importantly a link for the reference.

Thanks in advance

Replies (3)

Rakesh Bandal

Self Employed and Agriculture

1349 Points Joined November 2014

Currently my client is also availing service of Google (Google ad world) if you check CIN number of Google then you will find company is formed in India, so payment is not made to person outside India

Other suggessions most welcome

Mayur Chitnis

Sr. Executive - Agency finance

23 Points Joined November 2017

Hi Rakesh,

Thank you for your reply.

I know Google company is based in India and is registered under name Google india Pvt. Ltd., however our company takes some services called DBM, RTB etc. which are billed in USD by a Google company based in Ireland.

So we have to pay E.L. on it.

Thank you

sonu sharma

job

53 Points Joined January 2012

Chapter VIII does not prescribe any requirement of grossing up of EL similar to the requirement for grossing up of tax provided in section 195A of the Income tax Act. However, it would be advisable to gross up the levy @ 6.383% where contractually the entire sum is required to be remitted otherwise the matter would become litigative and won't get solved till ITAT. Else, there may be an issue as regards allowability of deduction under section 40(a)(ib) of the Income tax Act, considering that EL is treated as per law to be a 'deduction'.

Further, you can refer the case law of Bosch Ltd. v. ITO (2013) 141 ITD 38/155 TTJ 354 (Bang.)(Trib.) in Hon'ble Bangalore Tribunal held that the grossing up of the amount is to be done at the rates in force for the financial year in which such income is payable and not at 20 percent as specified under section 206AA.