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With the increase in technology and digital presence. There comes enough demand for the Supply and Procurement of Digital Services. Consequently, this has given rise to various new business models, where there is a heavy dependency on telecommunication networks. There also comes a tax Challenge along with it. In order to have a fair share of the tax rules, the government introduced vide Budget 2016, the equalization levy to give effect to one of the recommendations of the BEPS (Base Erosion and Profit Shifting) Action Plan.
It is a direct tax, which is withheld at the time of payment by the service recipient.
The two conditions to be met to be liable to equalization levy:
Currently, not all services are covered under the ambit of the equalization Levy. The following services covered:
As and when any other services are notified will be included with the aforesaid services.
Currently, the applicable rate of tax is 6% of the gross consideration to be paid.
Rohan has advertised on Facebook to expand his business. He has to pay Rs. 2,00,000 in FY 2017-18 to Facebook for the advertising services availed.
Facebook will bill Rohan for an amount of Rs. 2,12,765.9
Rohan will deduct TDS at the rate of 6% of Rs. 2,12,765.9 = Rs. 12,765.9 and pay the balance of Rs. 2,00,000 ( Rs. 2,12,765.9 – Rs. 12,765.9) to Facebook.
The due date of furnishing the Equalisation Levy Statement (Form-1) is on or before 30th June of the Financial Year ended. This is the annual statement.
From the above example, let us assume Rohan made the payment on 15th February.
He will have to deposit the tax with the authorities by 7th March 2019 and file the statement (i.e. Form -1) on or before 30th June 2019.
Interest is charged at 1% of the outstanding levy for every month or part thereof is delayed.
The compliance procedure for the Equalisation Levy is the responsibility of the service recipient.
1. Penalty for failure of payment
2. Penalty for failure of filing statement of compliance
Find your form here: Form 1-Equalisation levy