In News
- Recently, the Ministry of Finance stated that the Equalisation levy imposed by India on supply of services by multinational enterprises is a ‘sovereign right’.
What is an Equalisation Levy?
- It was first introduced by the Finance Act, 2016, at the rate of 6 per cent on payments for digital advertising services received by non-resident companies without a permanent establishment (PE) in India, if these exceeded Rs 1 lakh a year.
- The Budget 2020-21 has expanded its scope to include consideration received by non-resident e-commerce operators from e-commerce supply or services.
- The rate applicable has been set at 2 per cent.
- It is aimed at taxing business to business transactions.
- Eligibility:
- Companies with a turnover of over Rs. 2 crore, will pay this levy on the consideration received for online sales of goods and services.
- Purpose:
- The purpose of the levy is to ensure fair competition, reasonableness and exercise the ability of governments to tax businesses that have a close nexus with the Indian market through their digital operations
- Applicability of Equalisation Levy:
- Equalisation Levy is a direct tax, which is withheld at the time of payment by the service recipient.
- The two conditions to be met to be liable to equalisation levy:
- The payment should be made to a non-resident service provider;
- The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.
- Services Covered Under Equalisation Levy:
- Currently, not all services are covered under the ambit of equalisation Levy.
- The following services covered:
- Online advertisement
- Any provision for digital advertising space or facilities/ service for the purpose of online advertisement
- As and when any other services are notified will be included with the aforesaid services.
Source:IE
