What is Equalisation Levy (EQL)?
Equalisation Levy, also known as EQL, is a tax imposed by the Indian government on specified digital services provided by non-resident companies.
Why is Equalization Levy charged?
Equalisation Levy is charged to prevent non-resident companies from avoiding taxes in India. It ensures that these companies contribute to the Indian tax system.
Which services are covered by Equalisation Levy?
Currently, Equalisation Levy is applicable to online advertising services. This includes digital advertising space provision and other related services as notified by the Central Government.
Who does Equalisation Levy apply to?
Equalisation Levy applies to non-resident companies that do not have a permanent establishment in India. Companies such as Google, Yahoo, and Facebook that generate significant revenue from digital advertising services in India are subject to this tax.
Does Equalisation Levy apply to individuals advertising for personal use?
No, Equalisation Levy does not apply to payments made for personal use. It is applicable to business-to-business (B2B) transactions rather than business-to-consumer (B2C) transactions.
What is the rate of Equalisation Levy?
The current rate of Equalisation Levy is 6% on the specified digital services.
Are there any exemptions from Equalisation Levy?
Yes, there are exemptions from Equalisation Levy. If the total cost of services received in the preceding year is equal to or less than Rs.1 lakh, no Equalisation Levy is charged. Additionally, companies based in Jammu and Kashmir are exempt from this levy.
If I have paid Rs. 40,000 to Facebook for advertising services in a financial year, do I need to pay Equalisation Levy?
No, you are not required to pay Equalisation Levy as your annual advertising expenditure does not exceed Rs. 1 lakh.
What happens if a company forgets to pay Equalisation Levy to the service provider?
If a service provider fails to charge Equalisation Levy, the burden of payment is transferred to the service recipient (company).
When is the due date for furnishing the Equalisation Levy Statement?
The Equalisation Levy Statement in Form No.1 should be submitted electronically on or before June 30, which is the day after the end of the financial year.
Please note that these answers are based on the information provided in the previous response and may be subject to changes in the relevant laws or regulations.
How has the Finance Act of 2020 expanded the scope of the Equalisation Levy?
The Finance Act of 2020 introduced a significant expansion to the scope of the Equalisation Levy. Previously, the levy only applied to consideration received for online advertising services provided by non-resident companies. However, with the amendment, a new section called Section 165A was added to the Finance Act of 2016.
This amendment brought e-commerce supplies or services provided by e-commerce operators within the purview of the Equalisation Levy. It means that e-commerce operators are now liable to pay a new Equalisation Levy of 2% on the consideration received or receivable for e-commerce supplies or services.
When did the New Equalisation Levy come into effect?
The New Equalisation Levy came into effect on April 1, 2020. Starting from the financial year 2020-2021, e-commerce operators providing e-commerce supplies or services to specified persons are required to pay the New Equalisation Levy.
What does "E-commerce supply or services" encompass under the New Equalisation Levy?
"E-commerce supply or services" under the New Equalisation Levy include the following activities as defined in clause (cb) of Section 164 of the Finance Act, 2016:
Online sale of goods owned by the e-commerce operator.
Online provision of services by the e-commerce operator.
Online sale of goods or provision of services or both facilitated by the e-commerce operator.
Combination of any of the above activities.
Does the New Equalisation Levy apply to all e-commerce goods or services provided by the e-commerce operator?
No, the New Equalisation Levy is not applicable to all e-commerce supplies or services provided by e-commerce operators. It only applies to specified persons as defined under Section 165A(1) of the Finance Act, 2016. These specified persons include:
Persons residing in India to whom the e-commerce operator provides goods, services, or both.
Customers who purchase goods, services, or both using an IP address located in India.
Non-resident persons in specific situations as determined by the law.
Is the New Equalisation Levy borne by the e-commerce operator or passed on to customers?
The New Equalisation Levy is directly imposed on the e-commerce operator and is their obligation to pay. However, the way an e-commerce operator handles this additional tax may vary. They may choose to bear the cost themselves or pass it on to customers by adjusting the consideration charged for their goods or services.
What are the payment deadlines for the New Equalisation Levy?
According to Section 166A of the Finance Act, 2016, an e-commerce operator is required to make quarterly deposits of the New Equalisation Levy to the Central Government. The due dates for payment are as follows:
30th June (for the quarter ending 30th June): Payment due by 7th July.
30th September (for the quarter ending 30th September): Payment due by 7th October.
31st December (for the quarter ending 31st December): Payment due by 7th January.
31st March (for the quarter ending 31st March): Payment due by 31st March.
What are the penalties for non-payment or delay in payment of the New Equalisation Levy?
Failure to deposit the entire New Equalisation Levy by the due dates may result in the following penalties:
Interest on delayed payment: Simple interest of 1% per month or portion thereof will be charged on the unpaid levy.
Penalty for non-payment: A penalty equal to the amount of the unpaid equalisation levy will be imposed on the e-commerce operator.
What are the consequences
of not filing the Equalisation Levy Statement?
Failure to file the Equalisation Levy Statement within the specified deadline may lead to a fine of Rs. 100 per day for each day of delay in filing.
What are the compliance obligations for e-commerce operators in providing the Equalisation Levy Statement?
Every e-commerce operator is required to prepare and provide an Equalisation Levy Statement in the prescribed format and manner to the Assessing Officer or any other authorized authority or agency. The statement should be provided by the 30th of June following the end of each financial year, and it must be filed annually.
Please note that the information provided is based on the available knowledge up to September 2021 and it is always recommended to refer to the latest laws and regulations for the most accurate and updated information on Equalisation Levy (EQL).
