Many online Advertisement portals (e.g. Facebook, Google, Twitter) are NR & do not have permanent establishment in India. Many resident assessee make payment to Facebook / Google for Advertisement & claim as a business expenditure u/s 37.
Example
Santosh & c0(Resident) made payment to Google since they don’t have any P.E. in India & Santosh & co will take deductions for such payment. Now India is losing its revenue since payer gets the deduction & amount recorded by payee is not taxable, So Finance Act 2016 w.e.f. 1/6/16 introduced new concept of equalisation levy.
Sec 163 of Finance Act 2016
This Chapter extends to the whole of India except the State of Jammu and Kashmir.
Provided that the consideration received or receivable for specified services and for e-commerce supply or services shall not include the consideration, which are taxable as royalty or FTS in India under the Income-tax Act, read with the agreement notified by the CG u/s 90/90A (Added by FA, 21)
Sec. 165 of Finance Act 2016:
Charge of Equalisation levy on Specified service Equalisation Levy @ 6% applicable if payment for specified service (ads) received / receivable by Non-resident from
A) A person resident in India & carrying Business or Profession
OR
B) Non-resident having Permanent Establishment. in India.
Equalisation levy not applicable
- Non Resident having Permanent Establishment in India & service connected with such Permanent Establishment (service provider) (Or)
- Aggregate amount recd. by Non Resident from payer is up to 1,00,000 in P.Y. Where the payment for the specified service by the person resident in India, or the Permanent establishment in India is not for the purposes of carrying out business or profession.
Where the payment for specified service by the person resident in India, or the permanent establishment is not for the purpose of carrying out business or profession.
Specified service means:
- Online Advertisement
- Any provision of digital advertisement space or any other facility or service for the purpose of online Advt.
Sec. 165A of FA 2016: Charge of equalisation levy on e-commerce supply of services [Added by FA 2020w.ef.AY 1/4/20]
On or after 01/04/20 Equalisation levy @ 2% applicable of the consideration received or receivable by an e-commerce operator from e-commerce supply or services made or
provided or facilitated by it
- To a person resident in India: or
- To a Non Resident in the specified circumstances: or
- To a person who buys such goods or services or both using internet protocol address located in India.
Equalisation levy not applicable:
- Where the e-commerce operator making or providing or facilitating e-commerce supply or services has a PE in India and such e-commerce supply or services is effectively connected with such PE:
- Where the equalisation levy is leviable under section 165: or
- Sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated is less than 2 crore during the PY.
For the purposes of this section, “specified circumstances” mean
- Sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though IP address located in India: and
- Sale of data, collected from a person who is resident in India or from a person who uses IP address located in India. Consideration received or receivable from e-commerce supply or services shall include
Consideration for sale of goods irrespective of whether the e-commerce operator owns the goods, so, however, that it shall not include consideration for sale of such goods which are owned by a person resident in India or by a Permanent Establishment min India of NR.
If sale of such goods is effectively connected with such Permanent Establishment
Consideration for provision of services irrespective of whether service is provided or facilitated by the e-commerce operator, so, however, that it shall not include consideration for provision of services which are provided by a person resident in India or by PE in India of NR, if provision of such services is effectively connected with such Permanent Establishment.
“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
“E-commerce supply or services” means
- Online sale of goods owned by the e-commerce operator: or
- Online provision of services provided by the e-commerce operator; or
- Online sale of goods or provision of services or both, facilitated by the e-commerce operator; or
- Any combination of activities listed in clause (i), (ii) or clause (iii)
Explanation –
For the purposes of this clause, “online sale of goods” and “online provision
of services” shall include one or more of the following online activities, namely:
(a) acceptance of offer for sale: or
(b) placing of purchase order, or
(c) acceptance of the purchase order; or
(d) payment of consideration; or
(e) supply of goods or provision of services, partly or wholly
Sec 166 of FA 2016: Collection & recovery of equalisation levy
Every resident person carrying on Business or profession or a non-resident having P.E. in India shall deduct the equalisation levy referred in see 165 from the amount paid/ payable to NR @ 6%. If aggregate amount of consideration for specified service is more than 1,00,000 in P.Y.
Note:
- Equalisation levy deducted shall be deposited to C.G. up to 7th of next month.
- If any person fails to deduct equalisation levy then also he’s liable to pay levy to Govt.
- Interest@1% per month or part of the month shall be applicable on late deposit of levy u/s 165 or 165A.
Sec. 166A of FA 2016 Collection and recovery of equalisation levy on e-commerce supply or services:
The equalisation levy referred to in section 165A, shall be paid by every e-commerce operator to the credit of the CG for the quarter of the FY year ending within following
| Quarterly | Due date |
| 30th June | 7th July |
| 30th September | 7th October |
| 31st December | 7th January |
| 31St March | 31st March |
