Equalisation Levy- Features, Chargeability, Time limit, Penalty

Last Updated On: June 10, 2020, 7:09 p.m.
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Equalisation Levy

Equalisation levy was the first time introduced in Finance Act,2016. Therefore, provisions relating to Equalisation Levy are contained in Chapter VIII of the Finance Act,2016. The aim of the Equalisation levy is to tax the digital transactions i.e. the income accruing to foreign e-commerce companies from India.

Applicability of Equalisation Levy (Section 163):

As per Section 163(1), it applies to the whole of India except Jammu & Kashmir.

Also, According to Section 163(3), it shall apply to the consideration received or receivable for specified services and to the consideration received or receivable for e-commerce supply or services made or provided or facilitated.

Specified Services means -

  • online advertisement
  • any provision for digital advertising space
  • Any other facility or service for the purpose of online advertisement.

E-commerce supply or services means –

  • online sale of goods owned by the e-commerce operator, or
  • online provision of services provided by the e-commerce operator, or
  • online sale of goods or provision of services or both, facilitated by the e-commerce operator, or
  • any combination of activities listed above

E-commerce operator refers to a non-resident who owns, operates, or manages digital or electronic facility or platform for the online sale of goods or online provision of services or both.

Chargeability of Equalisation Levy (Section 165):

It shall be charged @ 6% of the amount of consideration (if the annual payment made to one service provider exceeds Rs.1,00,000 in a financial year) for any specified service received or receivable by a person, being a non-resident from –

  1. A person resident in India and carrying on business or profession, or
  2. A non-resident having a permanent establishment in India

Time Limit for Remittance of Equalisation Levy (Section 166):

The equalisation levy so deducted during any month shall be paid by the assessee to the Central Government by the seventh day of the month immediately following the calendar month in which equalisation levy is deducted.

Let us take an example to understand it-

Suppose, Mr. Ram has deducted equalisation levy on 20th September than the time limit available to Mr. Ram for the deposit of equalisation levy is 7th October.

Chargeability of Equalisation Levy (Section 165A):

It shall be charged @ 2% of the amount of consideration (if the sales or turnover or gross receipts are in excess of Rs.2 crores in a financial year) received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it –

  • to a person resident in India, or
  • to a non-resident in the specified circumstances, or
  • to a person who buys such goods or services or both using an internet protocol address located in India.

Specified circumstances referred above means –

  • Sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though internet protocol address located in India, and
  • Sale of data, collected from a person who is a resident in India or from a person who uses an internet protocol address located in India.

Time Limit for Remittance of Equalisation Levy (Section 166A):

The equalisation levy so deducted shall be paid by every e-commerce operator to the Central Government for the quarter of the financial year ending with the date specified in table given below:

Date of ending of the quarter of financial Due date of the financial year
30th July  7th July
30th September 7th October
31st December 7th January
31st March 31st March

 

Interest on delayed payment of equalisation levy (Section 170):

Every assessee or e-commerce operator, who fails to pay the equalisation levy to the account of the Central Government within the period specified, shall pay simple interest @ 1% of such equalisation levy for every month or part of a month by which such crediting of the tax or any part thereof is delayed.

Penalty for failure to deduct or Pay Equalisation Levy (Section 171):

Nature of Default Penalty
Failure to deduct whole or any part of the equalisation levy In addition to payment of equalisation levy under 166(3) and interest u/s 170, penalty equal to the amount of equalisation levy that he failed to deduct would be leviable
Fails to pay whole or any part of the equalisation levy In addition to the equalisation levy in u/s 166(3) and interest u/s 170, a penalty equal to the amount of equalisation levy that he failed to pay
Failure to remit equalisation levy to the Central Government on or before the due date

In addition to the equalisation levy in u/s 166(3) and interest u/s 170, a penalty of Rs. 1,000 for every day during which the failure continues.

However, the penalty under this clause shall not exceed the amount of equalisation levy that he failed to pay.

 

Time Period for Furnishing Return (Section 167):

As per Rule 5 of Equalisation Levy Rules,2016, every assessee or e-commerce operator shall, submit Form No. 1 either verified through digital signature or through an electronic verification code on or before 30th June of Subsequent Financial Year, to the Assessing Officer or to any other authority or agency authorized by the Board.

Time Limit for Revised Return

If assessee or e-commerce operator notices any omission or wrong particular therein, may furnish a statement or a revised statement, within expiry of two years from the end of the financial year in which the specified services were provided.

Time Limit for Revised Return in response to notice issued by the Assessing Officer

As per Rule 6 of Equalisation Levy Rules,2016, where assessee or e-commerce operator fails to furnish the statement within the prescribed time, the Assessing Officer may serve a notice upon such assessee or e-commerce operator requiring him to furnish the statement within 30 days from the date of serving of such notice.

Penalty for failure to furnish statement (Section 172):

Where an assessee or e-commerce operator, fails to furnish the statement within the time prescribed u/s 167, he shall be liable to pay a penalty of Rs.100 for each day during which the failure continues.

Processing of Statement (Section 168):

  1. Where Form No. 1 has been filed by the assessee or e-commerce operator, such form shall be processed in the following manner –
  2. the equalisation levy shall be computed after making the adjustment for any arithmetical error in the statement,
  3. the interest, if any shall be computed on the basis of sum deductible or payable, as the case may be, as computed in the statement
  4. the sum payable by, or the amount of refund due to, the assessee or e-commerce operator shall be determined after adjustment of the interest computed against the equalisation levy paid u/s 166(2) or interest paid u/s 170,
  5. an intimation shall be prepared or generated and sent to the assessee or e-commerce operator specifying the sum determined to be payable by, or the amount of refund due to him
  6. the amount of refund due to the assessee or e-commerce operator in pursuance of the determination under clause (c) shall be granted to him
  7. However, no intimation shall be sent after the expiry of one year from the end of the financial year in which the statement is furnished.

Punishment for false statement (Section 176):

  • If a person makes -
  • a false statement in any verification,
  • or delivers an account or statement, which is false, and which he either knows or believes to be false, or does not believe to be true,
  • he shall be punishable with imprisonment for a term which may extend to three years and with fine.
  • Also, an offense under this section shall be deemed to be a non-cognizable offense.

Appeal to Commissioner of Income-tax (Section 174):

An assessee or e-commerce operator aggrieved by an order imposing a penalty under this Chapter may appeal to the Commissioner of Income-tax (Appeals) within a period of 30 days from the date of receipt of the order of the Assessing Officer. An appeal under this section shall be in Form 3 and verified electronically through digital signature or through EVC and shall be accompanied by a fee of Rs. 1,000. Where an appeal has been filed under this section, the provisions of sections 249 to 251 of the Income-tax Act,1961 shall apply to such appeal.

Appeal to Appellate Tribunal (Section 175):

An assessee or e-commerce operator who is not satisfied with the order made by the Commissioner of Income-tax (Appeals) under section 174, may appeal to the Appellate Tribunal against such order. The Commissioner of Income-tax may, if he objects to any order passed by the Commissioner of Income-tax (Appeals) under section 174, direct the Assessing Officer to appeal to the Appellate Tribunal against such order. An appeal shall be filed within 60 days from the date on which the order sought to be appealed against is received by the assessee or by the Commissioner of Income-tax, as the case may be. The appeal under this section shall be in Form No. 4. In the case of an appeal filed by the assessee or e-commerce operator, it shall be accompanied by a fee of Rs. 1,000. Where an appeal has been filed before the Appellate Tribunal, the provisions of sections 253 to 255 of the Income-tax Act shall, as far as may be, apply to such appeal.

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