CBDT defines Assessing Officer’s jurisdictional authority for equalization levy on e-commerce cos

Shishir Sinha New Delhi | Updated on May 30, 2020

The study comes four months after the government implemented new rules regulating foreign investment in e-commerce   -  William_Potter

Possibility of deferment seems to be very bleak now

The Finance Ministry now does not appear to be in mood of deferring Equalization Levy on e-commerce companies, as the Central Board of Direct Taxes (CBDT) has defined Assessing Officer (AO) jurisdiction for this levy purpose.

Introduced in 2016, Equalization Levy is also known as ‘Google Tax’ as initially it 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 for this purpose is 6 per cent. The companies using these services are required to withhold the tax amount. Later, in the 2020-21 Budget, the Government widened the ambit of the levy by including e-commerce companies. The applicable tax rate is two per cent (plus a surcharge) on amount of consideration received/receivable by an e-commerce operator. This has come into effect from April 1.

Now on May 29, the Principal Chief Commissioner of Income Tax (International Taxation) issued jurisdiction order to authorise tax officers working in the international taxation region having jurisdiction in respect of the assessee, to exercise or perform powers and functions for the purpose of expanded equalisation levy. This move has come at a time when industry lobby is working hard to get this deferred. In fact, last month a coalition of nine industries and trade bodies, representing a wide range of companies, from multi-nationals to infant start-ups in India and across the globe, wrote to Finance Minister Nirmala Sitharaman to delay the implementation of the ‘Equalisation Levy’ on e-commerce companies by at least nine months.

Here 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 levy will be paid by every e-commerce operator for the quarter of the financial year by seven days from the end of quarter except the last quarter. This means due date for April-June quarter would be July 7, July-September quarter would be October 7 and October-December quarter would be January 7 but March 31 for January-March quarter. Experts feel that with due date is approaching, the Government has set internal mechanism in process and making its intention clear.

According to Sandeep Jhunjhunwala, Partner at Nangia Andersen LLP, as the first due date for payment of Equalisation levy ie July 7, is fast approaching, the income tax authorities seem to be working steadily towards the implementation of this new levy and the chances of its deferment looks bleak. “Equally important would be for the Government to clear air on tangled issues such as need for non-resident e-commerce operators to have income tax registration in India for payment of Equalisation Levy, application of levy on gross consideration or commission income for platform based business models and corresponding exemption under the Income Tax Act to avoid double taxation,” he said.

Law says this levy will not be applicable for any e-commerce operator making/providing/facilitating e-commerce supply or services has 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 will not be asked to pay the levy. Experts wanted more clearer explanation of these provisions.

Published on May 30, 2020

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