No relief for non-resident e-comm companies from equalisation levy

The Finance Ministry has made it clear that non-resident e-commerce companies will not get any relief from the equalisation levy. Tuesday was the due date for paying the first instalment of the levy which came into effect from April 1.

“There is no such proposal,” a senior tax official told BusinessLine when asked if there will be any extension of the date. The response is important as a group of US and Indian companies, under the banner of US India Strategic Partnership Forum (USISF), wrote to Finance Secretary Ajay B Pandey urging him to defer “the date of implementation of the levy alternatively, postpone the first due date for payment or at least grant relief from interest for delayed payment of first instalment.” This group has members including Cisco, Boeing, Dell, Bank of America, Adobe, Fedex, Star & Disney India, ITC and SpiceJet.

The Finance Ministry is yet to take a call on granting relief from interest, in case of delayed payment.

Applicable tax

In the 2020-21 Budget, the government had widened the ambit of the equalisation levy (also known as Google Tax) by including e-commerce companies. The applicable tax rate is 2 per cent (plus a surcharge) on amount of consideration received/receivable by an e-commerce operator.

Here an e-commerce operator refers to 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 the levy will not be applicable for any e-commerce operator having permanent establishment in India. Also, an operator with annual turnover up to ₹2 crore is exempted from the levy. The letter to the Finance Secretary (who is also Revenue Secretary), as seen by BusinessLine, reiterated the request for deferment and clarifications on the expanded scope of the equalisation levy. The group felt that the Government is yet to respond to a number of questions posed by e-commerce operators.

Several issues

“Since the new levy was not accompanied by the customary Explanatory Memorandum explaining the object and purpose of the levy, the e-commerce operators have been grappling with the scope of the expanded levy including issues such as the scope of ‘consideration’ in the case of a market place model, interplay with existing provisions, exemption under domestic tax law, the mismatch between effective date of the expanded levy and corresponding exemption under domestic tax law, among others,” the letter said.

It was expected that there would be answers to ‘Frequently Asked Questions (FAQ)’ or clarifications. Rather, on July 3, the Finance Ministry modified the Income Tax New Series challan form (ITNS-285) by adding ‘E-commerce operator for e-commerce supply or services’ under the heading ‘Type of Deductor’. Also, under address section, there is an option to mention ‘Outside India.’ PAN (Permanent Account Number) needs to be quoted mandatorily.

Businesses are peeved over the PAN issue. They said one section of IT law does not require PAN and secondly getting PAN for a non-resident at such a short notice is not possible. Non-residents do not have a bank account in India. There could be issues with directly remitting payment to the authorised banks in the country, it is said.

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