Equalisation Levy of 6% on e-commerce transactions applicable from 1-Jun-2016

June 6, 2016
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[By Shaleen Shah (Partner), VNCA]

We had informed you earlier that based on the recommendations a CBDT committee on taxation of e-commerce, Finance Minister Arun Jaitley had in his Budget proposed an Equalisation Levy of 6% to tap tax on income accruing to foreign e-commerce companies from India.  Budget-2016 has been enacted on 14-May and the Equalisation Levy comes into effect from 1-Jun-2016.

Where a person making payment to a non-resident (who does not have a permanent establishment) exceeding in aggregate Rs 1 lakh in a year will withhold tax at 6% of gross amount paid, as equalisation levy.  This levy shall be applicable only to B2B transactions.

The specified services would include online advertising or any services, rights or use of software for online advertising, including advertising on radio and television, designing, hosting or maintenance of websites, digital space for website, e-mails, blogs, facility for online sale of goods or services or collecting online payments.

Equalisation Levy Rules have been notified.  Every person who is liable to deduct and pay ‘Equalisation levy’, shall remit the tax collected by the 7th of the subsequent month and shall furnish a statement in Form No. 1 electronically on or before of 30-Jun immediately following that financial year.

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