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What is the Equalisation levy?
It is aimed at taxing business-to-business transactions. It is introduced in order to tax digital transactions. This is especially for the income accurred in foreign e-commerce companies from India.
Why Equalisation levy was introduced?
Since there is an expansion of Information technology globally, digital services have also expanded all over especially in India. India acts as a hub for most of the e-commerce in foreign countries. The new business evolution has challenged the Taxation area. To avoid the chaos and to bring clarity, 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.
Where does Equalisation Levy apply
Equalisation Levy is a direct tax. It is withheld at the time of payment by the service recipient.
The two conditions to be met to be liable to equalization levy:
Generally, all the services are not covered under the equalization Levy.
However, here is the list of services that are covered under the Equalisation levy
Tax Rates and Slabs
As per the current rule, the rate of tax is 6% of the gross consideration to be paid.
Sid has advertised on Instagram about his business and services. He has used services for 1,00,000 in Instagram for the particular financial year FY 2018-19
Instagram will bill Sid for an amount of Rs. 1,12,765.9
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.
Due Dates and Delayed Payments
The Equalisation levy statement has to be submitted through Form- 1. The Due date of furnishing the Equalisation Levy Statement (Form-1) is on or before 30th June of that particular Financial Year. It is an Annual return statement.
In case of delay in payment, There is an interest charged at the rate of 1% on the outstanding levy every month.
In case there is non-compliance on behalf of the service recipient:
The compliance procedure for the Equalisation Levy is the responsibility of the service recipient.
Penalty for failure of payment
Penalty for failure of filing statement of compliance
Find Your form here: Equalisation levy