Amendment to Equalisation Levy Provisions: Key Changes Effective 1st August 2024

Amendment of provisions related to Equalisation Levy 

Chapter VIII of the Finance Act, 2016 related to equalisation levy was amended by Finance Act, 2020 to provide for imposition of equalization levy (EL) of two per cent on the amount of consideration received/ receivable by an e-commerce operator from e-commerce supply or services. An “e-commerce operator” means 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. 

The levy is imposed on the amount of consideration received or receivable from–

(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 ecommerce operator; or 
(iv)any combination of the above-mentioned activities. 

2. However, the levy is not applicable where the e-commerce operator has a permanent establishment (PE) in India, and the e-commerce supplies or services are effectively connected with such PE. The levy is applicable on consideration received or receivable by the e-commerce operator from e-commerce supply or services made or provided or facilitated by it–

(i) to a person resident in India; 

(ii) to a non-resident from–

(a) sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement through an IP address located in India; and 

(b) sale of data, collected from a person who is resident in India or from a person who uses an IP address located in India; and

(iii) to a person who buys goods or services, or both, using an IP address located in India. 

3. Some stakeholders have raised concerns that the scope of 2% equalisation levy is ambiguous and as a result it leads to compliance burden. In view of this it is proposed that this equalisation levy at the rate of 2% shall not be applicable to consideration received or receivable for e-commerce supply or services, on or after the 1st day of August, 2024. Any service which was liable to equalisation levy was exempt in sub-section (50) of section 10 subject to certain conditions. Consequently as the 2% levy is being made inapplicable, it is proposed that income arising from ecommerce supply or services made or provided or facilitated on or after the 1st day of April, 2020 but before the 1st day of August, 2024 only, shall fall in the ambit of clause (50) of section 10 of the Act.

These amendments will take effect from the 1st day of August, 2024.

[Clauses 4 & 157]