November 6 2020

India Issues Implementing Guidelines for Equalization Levy on E-Commerce Supply or Services

Source: IBFD Tax Research Platform News

The Central Board of Direct Taxes (CBDT) has issued guidelines implementing a 2% equalization levy (EL) chargeable on certain non-resident e-commerce supply or services under the Finance Act, 2020, with the existing rules and forms on the advertisement equalization levy being amended to extend their application to e-commerce supply or services.

In this regard, the CBDT issued the Equalization Levy (Amendment) Rules, 2020 to amend the Equalization Levy Rules, 2016. The amended EL rules remain largely the same, except for:

  • the substitution of the phrases "specified services or e-commerce supply or services" and "assessee or e-commerce operator" in provisions that mention "specified services" and "assessee", respectively; and
  • the revised Statement of Specified Services or E-commerce Supply or Services (Form No. 1) and Appeal to the Commissioner of Income Tax (Form No. 3), namely:
    • in Form No. 1, an e-commerce operator (i.e. the payer) is only required to provide information on the EL remitted to the government for each calendar quarter, unlike the requirement for specified services where the payer is required to provide information for each service provider and transaction;
    • in the case of a corporate payer, Form No. 1 may be verified by a person authorized to verify the income tax return under section 140 of the Income Tax Act or the principal officer (previously, the managing director or director or principal officer); and
    • in Forms No. 1 and 3, a payer for specified services or e-commerce supply or services may provide the Aadhar number instead of the Permanent Account Number (PAN) (previously, only the PAN is accepted).

Full details of the amended rules are available here.

Note: The Finance Act, 2020 extends the application of the equalization levy to e-commerce supply or services, in addition to specified services (i.e. online advertisement or any provision of digital advertisement space), effective from 1 April 2020. The obligation to withhold and remit the EL falls in the hands of the payer.