Ministry of Finance: Submission requesting for clarification/ guidance on provisions relating to Equalization Levy introduced vide Finance Act, 2020

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Ministry of Finance: Submission requesting for clarification/ guidance on provisions relating to Equalization Levy introduced vide Finance Act, 2020

Tejasvi

@tejasvi

July 1, 2020

Public Policy

472

As you are aware, latest amendments to EL provisions represent a significant increase in the scope of levy. Now, EL @ 2% is applicable on consideration received/ receivable by non-resident e-commerce operators on e-commerce supply or services made or provided or facilitated by it, effective April 1, 2020.

The proposal for imposition of EL was not included in Union Budget 2020-21 unveiled in February 2020. Neither was this proposal discussed or debated in the parliament. Resultantly, the Levy was introduced and passed in both houses of the Parliament without any discussion. Further, given that India is engaged in OECD led process to arrive at global consensus on the approach to tax digital economy, unilateral measures like EL lead to multiple layers of taxation for the same income with no benefit of credit, thus increasing the cost of doing businesses.

Based on industry feedback, we had on May 5, 2020, submitted a detailed representation highlighting issues where clarification/ guidance is required from the government as it will not be possible to operationalise the levy otherwise.

Lack of clarity and short timelines for compliance is further compounded by the COVID-19 pandemic, which has disrupted business all over the world and compelled businesses to function at a fraction of their full capacity.

While we understand that extra-ordinary circumstances facing the Government, might have constrained it to expedite passage of the Finance Bill, we have requested the Government to consult the industry on: (a) the basis of the Levy; (b) practical challenges in implementation and enforcement; and (c) potential impact on e-commerce businesses.

The fact that due date for payment of first instalment of Equalization Levy to the credit of Government is fast approaching (i.e., July 7), it is worrisome and is causing some level of anxiety within the Industry.

Hence, in the first instance, we have requested the Government to defer applicability of Equalization Levy provisions by at least 6 months after necessary clarifications are provided. If due to some reason that is not possible, it would be useful if the government issues necessary clarification/ FAQs at the earliest. This will help in providing some clarity to the Industry.

We look forward to hearing from the government. We will keep you posted on further developments in this regard.

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Tejasvi