Finance Bill, 2020 proposes to expand the scope of the “equalisation levy” to include consideration received by e-commerce operators from e-commerce supply or services, and taxed at a rate of 2%. This levy has an effective date of 1 April 2020.
As part of the measures to address the tax challenges posed by the increased digitalization of the economy, an “equalisation levy” was introduced by the Finance Act, 2016 on certain non-resident businesses. The levy was applied at a rate of 6% on certain “specified services”—such as online advertisement and any provision for digital advertising space or any other facility or service for the purpose of online advertisement.
The measure imposes an obligation on Indian business residents to deduct the amount of the equalisation levy on payments made for such specified services and to remit the amounts to the government.
For these purposes, an “e-commerce operator” is defined as a non-resident that owns, operates or manages a digital or electronic facility or platform for online sale of goods or the online provision of services.
The “e-commerce supply or services” on which the levy applies are:
The levy is applicable when the goods or services are provided / facilitated by the e-commerce operator to:
There are certain situations when the equilisation levy is not applicable. These include situations when:
Unlike in the case of the equalisation levy on specified services when the resident payer was responsible to deduct and pay the equalization levy, this levy on the e-commerce operator is the responsibility and is to be discharged by the operator itself, on a quarterly basis. Consequently, an exemption from income tax is proposed for the e-commerce operators in respect of amounts covered by the equalisation levy.
Similar to liabilities of the equalisation levy as previously imposed, this expanded levy would not be part of the Income-tax Act and, thus, would not be subject to provisions of India’s income tax treaties.
For more information, contact a KPMG tax professional in India:
Hitesh Gajaria | +91 22 309 02 110 | email@example.com
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.