Govt notifies equalisation levy, to come into force from June 1

The finance ministry has notified the rules for implementation of Equalisation Levy (EQL), meant to nullify the advantage of foreign e-commerce firms sans a physical presence in India over local competitors. The Central Board of Direct Taxes (CBDT), in a circular dated May 27, said the levy would come into force from June 1, 2016.

The EQL had already found its way into the statute with the Union Budget putting a 6% levy on online advertising fees paid to overseas companies by Indian customers if the gross value of such payments exceeds Rs 1 lakh a year. Google and Facebook are among firms that would be hit by the levy.

The CBDT circular brings in the details of the levy with regards to payment, statement of specified services required to be furnished, time limits, demand notice and appeal to Commissioner of Income-tax in case of any disputes.

“Equalisation levy made various players sit up and take notice, especially since this is India’s first step to tax digital economy, and one of the first few internationally. Now with rules in place, people need to start taking action, since the statement of specified services procured starting June 1, 2016 has to be reported in the statement to be furnished by June 30, 2017. The Rules provide clarity as to how an assessee can appeal against the order of the assessing officer. By keeping the filing of statement and even the filing of appeal electronic, CBDT has continued its motion to make India’s tax administration paperless,” said Rakesh Nangia, managing partner at

Nangia & Co.

While the present levy is restricted to online advertising and B2B transactions, the Committee on Taxation of E-commerce, in its 124-page report put out by the finance ministry sometime back, proposed that a host of e-commerce and other online activities be brought under its purview and this be extended to B2C transactions above a certain threshold.

Analysts noted that the levy could practically increase the cost of services as the foreign party will not allow the Indian player to deduct the levy from the invoice value.