As you may be aware, Finance Act 2020 has introduced the provisions relating to Equalisation Levy (EL). As per the provisions, EL @ 2% will be levied from April 1, 2020 on the amount of consideration received or receivable by an E-commerce operator from E-commerce supply or services made or provided or facilitated by it:
a) to a person resident in India; or
b) to a non-resident in specified circumstances – sale of advertisement targeted to Indian market or sale of data collected from India market;
c) to a person who buys such goods or services or both using internet protocol address located in India.
The proposal for imposition of EL was not included in Union Budget 2020-21 unveiled in February 2020. Neither was this proposal ever discussed or debated in the parliament. Resultantly, the Levy was introduced and passed in both houses of the Parliament without any discussion. Based on reading of the provisions, it is evident that there are various clauses which require further clarity or discussion. Some of the issues identified by NASSCOM are as follows:
- Expanded Scope – The levy, which hitherto was applicable only to digital advertising players, has now been expanded to cover all sorts of digital e-commerce transactions into India, as well as those transactions which use IP address in India. As a result, businesses having subscription-led model may also come under the ambit of EL.
- Applicability date – Should the existing EL provisions be withdrawn and introduced after consultation with the Industry?
- Consideration for applicability of EL – There is lack of clarity regarding the computation of consideration for applicability of EL – whether EL will apply on the entire transaction value or whether indirect taxes such as GST, VAT, etc levied in India on sale of goods or provision of services should be excluded while determining the amount of consideration on which EL should apply to avoid cascading effect of tax.
- Definition of E-commerce operator – E-commerce operator has been defined as 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. However, there is lack of clarity as to what is construed as “digital or electronic facility or platform” and the what activities are envisaged to be covered in the expression ‘operates or manages’ used qua the digital or electronic facility or platform.
- There appears to be a mismatch between the effective date of applicability of the provisions of the new equalisation levy i.e. 1 April 2020 and the corresponding exemption under section 10(50) which is applicable from April 1, 2021.
In this regard, we request you to provide your inputs/ feedback on EL provisions wherein further clarity or discussion needs to be done with the Ministry of Finance. You are requested to provide your inputs in the following format before April 24, 2020 to firstname.lastname@example.org and email@example.com
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Look forward to receiving your inputs.