India’s Digital Tax or Equalisation Levy – A Timeline

Since 2016, there has been much speculation around the implementation of the Equalisation levy, a direct tax aimed at taxing digital business to business transactions of foreign eCommerce companies that operate in India. While it has been four years since discussions around this tax first began in India, the equalisation levy has been subject to many debates. Avalara Inc. has created a timeline to help its readers understand the discussions around the Equalisation levy.

Q1 Equalization levy collections at ₹216 cr vs ₹309 year on year

After falling Corporate tax and GST collections, the Centre has announced details of collections from the Equalisation levy, the deadline of which was on July 7th 2020. Preliminary data showed that the Centre was able to collect only ₹216 crore in Q1 as against ₹309 crore in the same period last year. The low collection numbers have been accounted to the nationwide lockdown which disrupted the operations of eCommerce companies.

Equalisation levy deadline will not be extended says Centre

The implementation of the equalisation levy which was introduced during the 2020-21 Budget came into effect on April 1st 2020 and the deadline for payment of this tax for the months of April to June was July 7th 2020. While a number of eCommerce businesses have requested an extension from the Centre due to the Coronavirus pandemic, the Centre has announced that companies have had enough time and will not be extending the deadline. The Centre has also announced that a late payment of 1% per month will be charged for companies that have missed the deadline.

2% equalisation levy is not discriminatory says India to USA

In a written submission to the United States Trade Representative (USTR), India defended the 2% equalisation levy stating that it is applicable only for companies with annual revenues in excess of ₹20 million (USD 267,000), which is a low threshold aimed at exempting very small e-commerce operators globally. “It does not discriminate against companies based in the United States as it applies equally to all non-resident e-commerce operators not having permanent establishment in India, irrespective of the origin of such companies,” India has said. The United States has claimed that India is being discriminatory toward US based eCommerce companies by implementing an equalisation levy.

US technology giants not ready to pay equalisation levy to India says lobby group

A lobby group representing technology giants in the United States have requested India to defer the deadline for payment of the Equalisation tax which is due on July 7th 2020. India had announced the implementation of the equalisation levy in the Budget reading this year and US eCommerce companies claim this announcement caught them off guard.

IT department amends tax challan to include non-resident e-commerce suppliers for equalisation levy

The income tax department has made changes to the challan for paying the equalisation levy by expanding its scope to include non-resident e-commerce players supplying goods or services online. The income tax department has modified challan ITNS 285 to enable payment of the first installment of the equalisation levy due on July 7th 2020 by non-resident eCommerce operators.The amended challan now adds “eCommerce operator for eCommerce supply or services” under ‘Type of Deductor’.

India has collected ₹4,000 crore under the equalisation levy since 2016

A 6% tax on revenue earned by non-residents from online advertising and related services, called the equalisation levy was first introduced in June 2016.  Since its introduction, India has collected around ₹4,000 crore in tax revenue.