Budget 2021

Expanded scope to cover more e-commerce transactions

Our Bureau Mumbai | Updated on February 01, 2021

To provide certainty, the Finance Ministry has clarified that transaction taxable under income-tax are not liable for equalisation levy on online players.

Further, it has also clarified regarding the applicability of equalisation levy on physical/offline supply of goods and services.

“The Budget has corrected the anomaly of mismatch in the effective date of income-tax exemption with applicability of EL retrospectively. So it is now clear that there will be a corresponding exemption from income-tax if equalisation levy is payable. Although, levy will not apply on receipts subjected to royalty / FTS taxation in India. They will continue to be taxed at 10 per cent,” said Shefali Goradia, Partner, Deloitte India.

Online transactions

“ Also, ‘online sale of goods or services’ have been defined to include any case where either a purchase order has been placed online or an offer is accepted online or even where a payment is accepted online. This may cover all e-commerce transactions in their broadest sense without exemption for intra-group transactions. Many European jurisdictions provide such exclusion under their DST laws,” she added.

Amit Maheshwari, Tax Partner, AKM Global, a consulting firm, said that the definition of ‘online supply of goods’ and ‘online supply of services’ provided now is very wide and could be a cause of concern for online players.

“This is against expectations and would be damaging as any of the activities performed online with regard to supply would trigger the levy. It is also clarified that the consideration shall include value of all goods and services traded through the portal irrespective of whether the e-commerce operator itself own the goods or services or not. The inclusion of the whole consideration especially for third party products or services into the ambit of levy is not justifiable as the e-commerce commerce operator is merely a facilitator and it would have been prudent if the commission only would have been included in such a scenario.”

Tech services

Ritesh Kumar, Partner, IndusLaw, said following the USTR 301 investigation, the Finance Ministry has now proposed to rationalise the equalisation levy provisions such as exclusion of royalty or fees for technical services from the scope of equalisation levy.

“This will mean that transactions involving software licensing could potentially be subject to withholding tax pending the Supreme court’s decision on this matter. Clarifications as regards what constitute online sale of goods and online provision of services have also now been provided. Consequential amendments are also made to Section 10(50) which provides for aforesaid exemptions,” said Kumar.

Published on February 01, 2021

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