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Indian Economy

Equalisation Levy for Non-Resident E-Commerce Firms

  • 08 Jul 2020
  • 3 min read

Why in News

Recently, the Central government has stated that it will not extend the deadline for payment of equalisation levy by non-resident e-commerce players, even though a majority of them are yet to deposit the first installment of the tax.

Key Points

  • Background for Equalization Levy:
    • Equalisation levy at 6% has been in force since 2016 on payment exceeding Rs 1 lakh a year to a non-resident service provider for online advertisements.
      • It is now applicable for e-commerce companies that are sourcing revenue from Indian customers without having tangible presence here in the country.
    • The amendments to the Finance Act, 2020 had expanded the ambit of the equalisation levy for non-resident e-commerce operators involved in supply of services, including online sale of goods and provision of services, with the levy at the rate of 2% effective April 1, 2020.
      • The tax applies on e-commerce transactions on websites such as Amazon.com. Google in particular as the tax applies on advertising revenue earned overseas if those ads target customers in India.
  • Changes in Challan ITNS 285:
    • The income tax department has modified challan ITNS 285 (relating to payment of equalisation levy) to enable payment of the first installment by non-resident e-commerce operators.
    • The challan also seeks mandatory PAN and provides for ‘Outside India’ option while seeking address.
  • Penalties Involved:
    • The non-payment could result in a penalty equal to the amount of equalisation levy, along with interest.
    • The late-payment would attract interest at the rate of 1% per month or part of the month.

Way Forward

As India is racing towards becoming a digital giant and should be negotiated to avoid any hurdles in its implementation. Further, there needs to be international consensus on taxation on a digital economy.


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