Equalisation Levy - Explained

As a result, the Finance Act of 2016 imposed an Equalisation Levy on online advertising services, digital advertising space provision, and any other facility or service used exclusively for online advertising. The Finance Act of 2020 has broadened the tax's application to include e-commerce services and products that are rendered, supplied, or facilitated on or after April 1, 2020.

This document covers

1. Equalization levy on specified services
2. Equalization levy on E-Commerce supply of goods or services
3. Due Date for payment of equalisation levy
4. Consequences of Late payment
5. Statement of Equalisation levy
6. Consequences of non-furnishing statement in Form 1

1. Equalization levy on specified services

When a Non-Resident provides specified services, the recipient of service should pay Equalisation levy on the consideration paid for such service.

1. Specified Services: Specified Services means the following services
   1. Online Advertisement
   2. Any provision for digital advertising space or any other facility or service for the purpose of online advertising
   3. Any other service as notified by Central Government
2. Who are required to deduct Equalisation levy: The following persons are required to deduct equalisation levy on the amount of consideration for specified services paid to a Non-Resident.
   1. A person resident in India carrying on business or profession.
   2. A Non-Resident having a permanent establishment in India.
3. Rate of Equalisation levy: The rate of equalisation levy on the services is 6% on the amount of consideration.
4. Threshold: Equalisation levy needs to be deducted if the aggregate amount of consideration for specified services exceeds Rs 1 Lakh

2. Equalization levy on E-Commerce supply of goods or services

When an e commerce operator makes, provides or facilitates any e-commerce supply or services on or after 01st April 2020, such e-commerce operator needs to pay equalization levy on the consideration received for such supply of service.

1. E-Commerce operator: 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.
2. E-Commerce supply or services: E-Commerce supply or services means the following.
   1. Online sale of goods owned by the e-commerce operator.
   2. Online provision of services provided by the e-commerce operator.
   3. Online sale of goods or provision of services or both, facilitated by the e-commerce operator; or
   4. Any combination of above activities.

   Note: Online sale of goods and online provision of services shall include Acceptance of offer for sale, Placing of purchase order, Acceptance of purchase order, Payment of consideration, or Supply of goods or provision of services, partly or wholly.

   Even if the buyer sends the purchase order by email, it will be treated as online sale of goods.

3. When equalisation levy shall be charged?: Equalisation levy will be charged when e-commerce supply or services is provided to following persons.
   1. A person who is resident in India
   2. A person who buys such goods or services or both using internet protocol address located in India.
   3. A Non resident person in the following circumstances
      • Sale of advertisement which targets a customer in India who is resident in India or a customer who accesses the advertisement through internet protocol address located In India
      • A person who buys such goods or services or both using internet protocol address located in India.

Note: The consideration received or receivable for specified services and for e-commerce supply or services will not include the consideration which will be taxable as Royalty or Fees for technical services in Income tax act read with DTAA.

3. Due Date for payment of equalisation levy

The due dates for payment of equalisation levy are as follows

• Equalisation levy on specified services: On or before 7th day of the month following the month in which equalisation levy was deducted.
• Equalisation levy on E-Commerce transactions: The due dates are as follows

S.No	Period	Due Date
1	April to June	07th July
2	July to Sep	07th October
3	October to December	07th January
4	January to March	31st March

Note: Equalisation levy needs to be paid in the challan 285.

4. Consequences of Late payment

Interest: There will be a interest of 1% per month or part month during which such failure continues

Penalty: If the person fails to deposit the amount to Government, he is required to pay a penalty of Rs 1000 per day during which such failure continues. However the maximum penalty will be restricted to total equalisation levy

5. Statement of Equalisation levy

The persons who has deducted equalisation levy needs to file the statement in Form 1 on or before 30th June of the financial year immediately following the financial year in which the equalisation levy was deducted

For Example, for AY 2023-24, the due date is June 30th 2023

6. Consequences of non-furnishing statement in Form 1

If the person has not filed the equalisation statement in Form 1 within due date, the Assessing officer will serve a notice requiring him to furnish such statement. Such statements needs to be furnished by the taxpayer within 30 days from the date of such notice.

If the person fails to furnish statement, penalty @ Rs 100 per day will be levied upto the date of filing such statement.