Simplifying Tax for C.A's and Taxpayers
Equalisation Levy

Equalisation Levy

Equalisation levy-Tax on nonresident conducting online activities like Facebook, Google, etc.

A googly by honorable finance minister Sh.Arun Jaitely Ji by introducing the Google Tax @6%

As we all know today is era of globalization and business now a days is not confined to national boundaries, it has got digital domain. To tax the e commerce transactions in cyberspace which are growing at an increasing rate, finance budget 2016 introduced a new concept in finance act itself under chapter VIII called as “Equalisation Levy” or more familiarly called as “Google tax”.

01.06.2016 has been notified as date for applicability of the rules in this respect and accordingly central government vide notification no.38/2016 dated 27.05.2016 has prescribed the “Equalisation Levy rules, 2016”.

The provisions of Equalisation levy has been extended to whole of India except the State of Jammu and Kashmir.

Equalisation levy means the tax leviable on consideration received or receivable for any specified service.

Specified service means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the central government in this behalf.

Dear user’s important information in this respect is the inclusion of the definition of the term online”.

The term online has been defined as “online means a facility or service or right or benefit or access that is obtained through the internet or any other form of digital or telecommunication network”

On and from the date 01.06.2016, there shall be charged an equalisation levy @6% of the amount of consideration for any specified service received or receivable by a person, being a non-resident from

       (i) A person resident in India and carrying on business or profession; or

       (ii) A nonresident having a permanent establishment in India (permanent establishment includes a fixed place of business through which the business of the enterprise is wholly or partly carried on)

However, in following cases equalisation levy will not be charged:

  1. if the nonresident providing specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment, or
  2. The aggregate amount of consideration for specified service received or receivable in a previous year does not exceed one lac rupees., or
  3. Where the payment for the specified service is not for the purpose of carrying out business or profession.

The equalisation levy deducted from the amount paid or payable to a non resident in respect of the specified service shall be deposited to the credit of the central government by the seventh day of the month immediately following the month of deduction.

The amount of consideration for specified services and the amount of Equalisation levy, interest and penalty payable, and the amount of refund due shall be rounded off to the nearest multiple of ten rupees and any part of a rupee consisting paisa shall be ignored and thereafter if such amount is not in multiple of ten, then, if the last figure in that amount is five or more , the amount shall be increased to the next higher amount which is multiple of ten and if the last figure is less than five, the amount shall be reduced to the next lower amount which is multiple of ten.

The statement of specified services is required to be furnished in form no.1 under digital signature or through EVC code. This statement shall be furnished on or before the 30th June immediately following that financial year.

Also another information in this respect is the insertion of clause50 under section 10 of the Income tax act, 1961 which provides that:

any income arising from any specifies service provided on or after 01.06.2016 chargeable to equalisation levy, will not form the part of total income of the assessee.

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