I. How Finance Act, 2020 has widened the scope of Equalisation Levy?
As per Section 165 of the Finance Act, 2016 (“FA, 2016” for short), Equalisation Levy was chargeable only on the consideration received or receivable by a non-resident from providing online advertisement services or related services to the Indian resident or person having Permanent Establishment (“PE” for short) in India.
Now, by virtue of Finance Act, 2020, a new section 165A has been inserted in FA, 2016 to widen the scope of Equalisation Levy by including within its ambit the consideration received or receivable for E-commerce Supply or Services by an e-commerce operator. Now, e-commerce operator will be liable to pay Equalisation Levy @2% (“New Equalisation Levy” in short) of the consideration received or receivable by such e-commerce operator. New Equalisation Levy is made effective from 1st April, 2020.
II. Which persons are covered within the scope of “e-commerce operator”?
The expression ―e-commerce operator‖ has been defined by way of inserting a new clause (ca) in Section 164 of the FA, 2016. As per the said definition, ―e-commerce operator‖ means a non-resident who owns, operates or manages digital facility or platform for supplying goods online or for providing online services to the customers or for both. For attracting New Equalisation Levy, it is important that the e-commerce operator either itself owns a digital or electronic facility/platform or it is operating or managing such digital or electronic facility/platform.
III.What is the meaning of “e-commerce supply or services” for the purpose of New Equalisation Levy?
New Equalisation levy is attracted where an e-commerce operator is engaged in providing e-commerce supply or services. For this purpose, the expression “e- commerce supply or services” is defined in clause (cb) of Section 164 of the FA, 2016 as under:
- 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
- combination of any of the aforesaid activities.
The aforesaid definition can be better understood with the help of an example.
Suppose XYZ Inc. a non-resident is operating an electronic or digital platform, whereby services of enabling online meeting for various participants is being provided. The platform of XYZ Inc. is being used for online webinars/meetings, etc. by Indian customers who are availing such services by paying annual/ monthly charges. In the said example, XYZ, Inc. is an e-commerce operator and online provision of services of enabling webinars/meetings by the said company will fall within the meaning of “e- commerce supply or services”.
IV. Whether all the e-commerce supplies or services made/provided/facilitated by the e-commerce operator will attract the chargeability of New Equalisation Levy in India?
No, all the e-commerce supplies or services made/provided/facilitated by the e- commerce operator will not attract New Equalisation Levy. As per Section 165A(1) of the FA, 2016, only the supplies or services made/provided/facilitated to the following persons (“Specified Persons” for short) will attract New Equalisation Levy:
- Where goods or services or both are supplied by the e-commerce operator to a person resident in India;
- Where goods or services or both are supplied by the e-commerce operator to a person who buys such goods or services or both using internet protocol address located in India;
- Where goods or services or both are supplied by the e-commerce operator to a non-resident person under specified circumstances (Refer Q5 below).
V. Under which specified circumstances, an e-commerce operator is liable to pay New Equalisation Levy in relation to goods or services or both supplied to a non-resident?
An e-commerce operator would be liable to pay New Equalisation Levy in relation to goods or services or both supplied to a non- resident in the following circumstances:
(a) Where an e-commerce operator provides sale of advertisement to another non- resident wherein such advertisement targets an Indian customer or a customer who, accesses such advertisement through internet protocol address located in India. For instance, ABC, a UK based food company approaches PQR which is a US based company targeting Indian customers at large, for placing advertisement of its food products on digital platform of PQR. In this case, PQR will be liable to pay Equalisation levy @ 2% of the consideration received by it from ABC.
(b) Where an e-commerce operator is involved in sale of data, collected from an Indian resident or from a person who uses internet protocol address located in India. For instance, a UK based Company, an e- commerce operator, collects data from an Indian resident person and further sells such data collected to a UAE based company. In this case, UK based company selling the data collected from an Indian resident will be liable to pay Equalisation levy @2% on the amount of consideration received by it from the UAE based company.
VI. Under which circumstances/cases, New Equalisation Levy shall not be chargeable?
Section 165A(2) of the FA, 2016 as inserted by the Finance Act, 2020 provides the following circumstances wherein New Equalisation Levy shall not be chargeable: (i) Where the e-commerce operator making or providing or facilitating e-commerce supply or services has a PE in India and such e-commerce supply or services is effectively connected with such PE. (ii) Where Equalisation levy @6% is levied section u/s 165 of the FA, 2016. (iii) Where sales, turnover or gross receipts of the e-commerce operator from the e- commerce supply or services is less than Rs. 2 crore during the previous year.
VII. For determining the threshold limit of Rs. 2 Crore, whether the turnover, gross receipts etc., has to be considered for the preceding financial year or the current financial year?
As per sub-section (2) of Section 165A of the FA, 2016, New Equalisation Levy shall not be charged in case of an e-commerce operator if its turnover, gross receipts etc. from e-commerce supplies made or services provided to Specified Persons does not exceed Rs. 2 Crore during the previous year. For interpreting the meaning of ―previous year‖, clause (j) of Section 164 of the FA, 2016 is to be analysed which provides that any words and expressions not defined in the Chapter of equalisation levy shall have the same meaning as assigned to them in the Income-tax Act, 1961 (“IT Act” for short). Thus, the definition of ―previous year‖ is to be interpreted from Section 3 of the IT Act, as per which previous year means the financial year immediately preceding the assessment year. Therefore, for computing the threshold limit of Rs. 2 crores, turnover or gross receipts etc. of the current financial year i.e. FY 2020-21 is to be considered.
VIII. For determining the threshold limit of Rs. 2 Crore, whether global turnover of the e-commerce operator is to be considered or only its turnover from e- commerce supply or services to Specified Persons (“EL Turnover” for short)?
As per Section 165A(2)(iii) r.w. Sub-section (1) of Section 165A of the FA, 2016, for computing the threshold limit of Rs. 2 crore only the supplies or services made to the Specified Persons will be considered and not the global turnover or global receipts of the e-commerce operator. For instance, XYZ Inc. is engaged in providing media services all over the world in respect of which it has generated gross receipts of Rs. 15 Crore during the F.Y. 2020-21. Out of the said gross receipts, Rs. 1.5 crore has been received from customers resident in India. In the said case, New Equalisation Levy will not be attracted as the turnover from the customer resident in India does not exceed Rs. 2 crore.
IX. What are the due dates for depositing New Equalisation Levy to the credit of the Central Government?
As per Section 166A of the FA, 2016, an e- commerce operator has to deposit New Equalisation Levy to the credit of the Central Government on a quarterly basis as per the following due dates:
Apr-June – 07th July
July-Sept – 07th Oct
Oct-Dec – 07th Jan
Jan-Mar – 31st March
There appears to be a practical challenge as to deposit of New Equalisation Levy for the 4th quarter wherein the payment has to bemade within the quarter itself unlike the first 3 quarters where the said levy has to be deposited by the 7th day of the following month after the end of the respective quarter.
X. What is the compliance requirement of furnishing of statement by the e-commerce operator?
Every e-commerce operator shall prepare in respect of which it has generated gross and deliver Equalisation Levy Statement to receipts of Rs. 15 Crore during the F.Y. the Assessing Officer or to any other 2020-21. Out of the said gross receipts, Rs. authority or agency authorised by the 1.5 crore has been received from customers Board in such form and manner yet to be resident in India. In the said case, New prescribed. Further, due date of furnishing Equalisation Levy will not be attracted as the said statement is on or before 30th the turnover from the customer resident in June after the end of each F.Y. and the same is required to be filed annually.