Introduced in the Finance Act 2016, an “equalisation levy” at the rate of 6% (on the nonresident companies indulged in the digital advertisement space) sought to address the tax-related challenges by the growing digitization of the Indian economy. Effective from 1 April 2020, the scope has been widened to cover the levy of 2% on consideration received by Ecommerce operators from Ecommerce supply or services.

The provisions of equalisation levy are not a part of the income-tax law which means that the tax treaty benefits may not be available in relation to such levy.

Applicable to:

Applicable on non-resident E commerce operators who own, operate or manages a digital or electronic facility or platform for the sale of goods or provision of services (or both) via an online medium.

Applicable on: The levy is applicable on E commerce supply or services including –

• Online sale of goods owned by the e-commerce operator.
• Online provision of services provided by the e-commerce operator.
• Online sale of goods facilitated by the e-commerce operator (via a platform for others to supply goods or services).
• Any combination of the above.

Applicable when:

The levy will be applicable when the goods or services are facilitated to either a resident in India or to a person using an IP address located in India or to a non-resident (in respect of the sale of advertisements focussed at residents in India or using an IP address of/in India).

Exclusions:

The equalisation levy shall not be charged when

• The e-commerce operator has a permanent establishment in India and the e-commerce supply or services are effectively connected with such permanent establishment.
• The equalisation levy is leviable on an online advertisement and related activities; or
• The sales, turnover or the gross receipts of the e-commerce operator is less than Rs. 2 crores (INR 20 million) during the financial year.