Topics In Demand
Notification
New

No notification found.

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

February 10, 2021

118

0

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.


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

© Copyright nasscom. All Rights Reserved.