Finance Ministry modifies challan form for Equalisation Levy payment by non-resident e-commerce firms

Shishir Sinha New Delhi | Updated on July 04, 2020 Published on July 04, 2020

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Introduced in 2016, Equalisation Levy, also known as ‘Google Tax’

The Finance Ministry has modified the challan form for depositing equalisation levy by non-resident e-commerce companies. The first due date for depositing the equalisation levy is July 7.

The modified version of the Income Tax New Series challan form (ITNS-285) has added ‘E-commerce operator for e-commerce supply or services’ under the heading ‘Type of Deductor’. Also, under the address section, there is the option of mentioning ‘Outside India’. The Permanent Account Number (PAN) needs to be quoted mandatorily. ITNS-285 challan form is used to pay ‘Other Taxes and Duties on Commodities and Services’ and is known as the equalization levy challan.


The modification of the challan is the second big development after issuance of jurisdiction order to authorise tax officers working in the international taxation region having jurisdiction in respect to the assessee, to exercise or perform powers and functions for the purpose of expanded Equalisation Levy. Now a detailed Frequently Asked Question (FAQ) is expected from the Income Tax Department to facilitate payment of the levy.

Introduced in 2016, Equalisation Levy, also known as ‘Google Tax’, initially was applicable to payments for digital advertisement services received by non-resident companies without a permanent establishment (PE) here, if these exceeded ₹1 lakh a year. The rate of tax was 6 per cent. The companies using these services are required to withhold the tax amount. In the 2020-21 Budget, the government widened the ambit of the levy by including e-commerce companies. The applicable tax rate is 2 per cent (plus a surcharge) on the amount of consideration received/receivable by an e-commerce operator. This has come into effect from April 1.

Here an e-commerce operator means a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both. The law says this levy will not be applicable for any e-commerce operator making/ providing/ facilitating e-commerce supplies or services with a permanent establishment in India and such e-commerce supply or services is effectively connected with such permanent establishment. Also, an operator with annual turnover up to ₹2 crore is exempted from the levy.

Commenting on the modification in the challan form, Sandeep Jhunjhunwala, Partner at Nangia Andersen LLP, said that with the first due date for payment of equalisation levy by non-resident e-commerce players being on top of the ‘To Do List’ for July 7, 2020, the CBDT has made a last-minute amendment to payment Challan ITNS 285 so as to hold a single challan for payment of both EQ levy 1.0 by the Indian resident deductors as well as EQ levy 2.0 by non-resident e-commerce players on supply of goods or provision of services online. Along with this modification in the payment challan, CBDT has also cleared the clouds on requirement of PAN by making it a mandatory tab in the challan. This has rather imposed a burdensome and challenging task for non-resident e‑commerce players to apply for and obtain a PAN within one business day in the midst of the curbs, lockdown and pandemic-affected business life and also organise the mode of payment through an Indian bank account or debit card issued by an Indian bank.

“While the non-resident digital companies were awaiting a detailed FAQ to get clarity on abstruse issues surrounding the equalisation levy, this rushed move could cause substantial challenges in discharging the nearing first payment liability of equalisation levy, in case interest and penalty for delayed payments are to be avoided,” he said.

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Published on July 04, 2020
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