Submission to Ministry of Finance to highlight issues Issues faced by non-resident e-commerce operators in undertaking compliances relating to Equalisation Levy

Terms of use

Terms of Use

The use of this site and the content contained therein is governed by the Terms of Use. When you use this site you acknowledge that you have read the Terms of Use and that you accept and will be bound by the terms hereof and such terms as may be modified from time to time.

All text, graphics, audio, design and other works on the site are the copyrighted works of nasscom unless otherwise indicated. All rights reserved.
Content on the site is for personal use only and may be downloaded provided the material is kept intact and there is no violation of the copyrights, trademarks, and other proprietary rights. Any alteration of the material or use of the material contained in the site for any other purpose is a violation of the copyright of nasscom and / or its affiliates or associates or of its third-party information providers. This material cannot be copied, reproduced, republished, uploaded, posted, transmitted or distributed in any way for non-personal use without obtaining the prior permission from nasscom.
The nasscom Members login is for the reference of only registered nasscom Member Companies.
nasscom reserves the right to modify the terms of use of any service without any liability. nasscom reserves the right to take all measures necessary to prevent access to any service or termination of service if the terms of use are not complied with or are contravened or there is any violation of copyright, trademark or other proprietary right.
From time to time nasscom may supplement these terms of use with additional terms pertaining to specific content (additional terms). Such additional terms are hereby incorporated by reference into these Terms of Use.

Disclaimer

The Company information provided on the nasscom web site is as per data collected by companies. nasscom is not liable on the authenticity of such data.
nasscom has exercised due diligence in checking the correctness and authenticity of the information contained in the site, but nasscom or any of its affiliates or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this site. The information from or through this site is provided "as is" and all warranties express or implied of any kind, regarding any matter pertaining to any service or channel, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement are disclaimed. nasscom and its affiliates and associates shall not be liable, at any time, for any failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communications line failure, theft or destruction or unauthorised access to, alteration of, or use of information contained on the site. No representations, warranties or guarantees whatsoever are made as to the accuracy, adequacy, reliability, completeness, suitability or applicability of the information to a particular situation.
nasscom or its affiliates or associates or its employees do not provide any judgments or warranty in respect of the authenticity or correctness of the content of other services or sites to which links are provided. A link to another service or site is not an endorsement of any products or services on such site or the site.
The content provided is for information purposes alone and does not substitute for specific advice whether investment, legal, taxation or otherwise. nasscom disclaims all liability for damages caused by use of content on the site.
All responsibility and liability for any damages caused by downloading of any data is disclaimed.
nasscom reserves the right to modify, suspend / cancel, or discontinue any or all sections, or service at any time without notice.

For any grievances under the Information Technology Act 2000, please get in touch with Grievance Officer, Mr. Anirban Mandal at data-query@nasscom.in.

New

See all

No notification found.

Submission to Ministry of Finance to highlight issues Issues faced by non-resident e-commerce operators in undertaking compliances relating to Equalisation Levy

Tejasvi

@tejasvi

February 10, 2021

Public Policy

119

Background:

EL was first introduced in India vide Finance Act (FA) 2016, with effect from June 1, 2016 which requires specified person making payment to non-residents (NR) for online advertisement and related services, to deduct EL at 6% of gross consideration (6% EL).
FA 2020, introduced vide April 1, 2020, expanded the scope of EL to levy tax @ 2% on consideration received/receivable by NR e-commerce operators for e-commerce supply of goods or services made to resident persons, subject to certain conditions (2% EL).
The Central Board of Direct Taxes (CBDT), on May 27, 2016, notified Equalisation Levy Rules, 2016 (EL rules), which requires furnishing of annual statement in Form 1 in respect of all specified services chargeable to EL during any financial year. Further, CBDT notified amendments to EL rules in October 2020 to extend its applicability to 2% EL as well.

Challenges for NR e-commerce operator to file annual statement in Form 1:

In case of a company, the annual statement in Form 1 is required to be furnished and verified by the person authorised to verify return of income under Income Tax Act, 1961 (Act) or the principal officer of the company.
Further, as per the current format of annual statement in Form 1, the verification section requires the person verifying annual statement to mandatorily furnish Permanent Account Number (PAN).
As per S. 139A of the Act read with Rule 114 of Income Tax Rules, 1962 (Rules), a person is required to obtain PAN, inter-alia, only if such person is subject to income-tax in India.
In case of NR e-commerce operators, the person verifying the annual statement is likely to be a NR employee who would, most likely, not satisfy the requirements for obtaining PAN in India.
Accordingly, mandating PAN for such employee of a foreign company, merely for the purpose of filing annual statement, creates unnecessary procedural burden. Further, in cases where the person verifying the annual statement is unavailable and a different NR employee is appointed in his/her place, the PAN process would need to be redone for the new employee, leading to further administrative hassles.
As per S. 139 of the Act read with Rule 12 and form ITR-6 notified for companies, the return of income of a foreign company is required to be verified electronically through Digital Signature Certificate (DSC) of the authorised signatory. However, it is not mandatory to quote PAN of the signatory for signing return of income of the foreign company. Thus, the intention of the law is not mandate NR employee of a foreign company to obtain PAN for undertaking various compliances in India.

Recommendation
In this regard, NASSCOM has made a submission to Ministry of Finance requesting the government to issue a clarification that it is not mandatory for non-resident employee, verifying the annual statement of a NR e-commerce operator, to obtain and furnish PAN in India, as long as a valid DSC is used for verification. This will help in simplifying EL compliances for NR e-commerce operators and would be in line with the current process of filing tax returns for non-resident entities.

We hope you will find the update useful. We will keep you posted on further developments in this regard.

Disclaimer

That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.

Tejasvi