Short brief
on introduction of concept of equalization levy scheme in India
There was a great need of the time
following the era of digitalisation in India during the last decade, as use of
smart phones have increased to a significant extent, which in turn have rapidly
increased the promotional and advertising activities through digital modes like
various business and corporate houses, start-ups in India has started promoting
their products and services digitally through facebook, instagram, you tube and
various other applications, the server of which are located outside India. The
biggest challenge before the Income tax authorities was that they cannot tax such
income as business was conducted without regard to national boundaries and may
dissolve the link between an income producing activity and a specific location.
In digital Domain the business doesn’t occur in any physical location but
instead takes place in cyberspace due to which it becomes difficult to
determine the taxability of Income.
To overcome this situation and to
protect the interest of revenue the Central Government of India has introduced
the concept of Equalization levy Scheme vide VIII Chapter in the Finance Act, 2016
with effect from 1st June 2016 to whole of India except Jammu and
Kashmir. The Idea of this levy was taken from BEPS Action plan 1, which
provides 3 recommendations out of which India has implemented 2 recommendations
i.e. equalization levy and significant economic presence concept.
But what actually equalization levy
means and to whom it is applicable, lets understand more analytically through
the wordings of bare text;
Meaning of Equalization levy:
Equalization Levy means the tax leviable on consideration received or
receivable for any specifies service.
What is specified service?
i). Online Advertisement;
ii). Any provision for digital
advertising space or any other facility or service for the purpose of online
advertisement or any other service as may be notified by the central government
in near future.
Charge of levy ( Section 165 of
Finance Act,2016 is the charging section )
Equalization levy is levied at the
rate of 6% on the amount of consideration for specified service (as mentioned
above) received or receivable by a person, being non-resident from-
(a) A person resident in India and carrying on
business or profession or
(b) A non-resident having a PE in India.
Equalization levy is not
chargeable, where-
(a) The
non-resident providing the specified service has a PE in India and the
specified service is effectively connected with such PE;
(b) The
aggregate amount of consideration for specified service received or receivable
in a previous year by the non- resident from a person resident in India and
carrying on business or profession, or from a non-resident having a PE in
India, does not exceed INR 1 lakh or
(c) Where the
payment for the specified service by the person resident in India or the PE in
India is not for the purposes of carrying out business or profession.
Conclusion: The introduction of
such tax regime proves to be boon for the Indian Economy as it helps in
increasing the tax revenue of the nation and to have a check and control over
the payments made to such E-commerce companies which are not having PE or place
of business in India.
For more info copy of short video
clip which is available on youtube is attached herewith,
https://youtu.be/xMfDD8Agdck
Happy Readings;
With Best Regards
CA Pushp kumar sahu
M. No. 7694905887
Comments
Post a Comment