The document discusses India's Equalization Levy, a tax on e-commerce businesses introduced in 2016, which was expanded in subsequent years to include various digital and online services. The levy, currently at 2% on gross consideration received by non-resident e-commerce operators, applies to various sectors including IT, telecommunications, retail, and media. Compliance requirements for e-commerce operators include obtaining a PAN in India, making quarterly payments, and filing an annual return.

1. Equalisation Levy
India’s Digital Tax on e-commerce business
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2. 2
Introduction
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As a result of BEPS project by OECD, in 2016, India introduced
‘equalization levy 1.0’ in the year 2016, applicable for gross
consideration received by a non-resident from online and
digital advertising. Rate of tax @ 6% on gross consideration.
Scope expanded in 2020 popularly known as ‘equalization levy
2.0’ to cover consideration received by a non-resident e-
commerce operator from e-commerce supply or service. Rate
of tax @ 2% on gross consideration.
Further clarity emerged in 2021, through a version update
with the introduction of ‘equalization levy 2.1’, where
transactions taxable as Royalty and FTS were excluded from
the applicability and further scope of e-commerce supply and
service was expanded.
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3. 3
E-commerce
Operator
• A Non-Resident who
owns, operates or
manages a digital or
electronic facility or
platform for online
sale of goods and
services, or both
Included Services
• Online provision of
goods and services or
both
• Online provision
including :
• Acceptance of
offer of sale
• Placing PO
• Acceptance of
PO
• Online payment
• Online Supply
Exclusions
• Non – Resident e-
commerce operator
with PE in India
(where PE is
connected to such e-
commerce business)
• Where aggregate
value of consideration
for transactions does
not exceed INR 20
million (approx. USD
265,000)
Payment
Responsibility and
Rate
• Non- Resident e-
commerce operator is
liable to pay the levy
• Rate of Levy = 2%
Service Recipient
• Person resident in India
• Any person who buys
goods or services using
IP address in India
• Any non-resident to
whom data is sold
which is collected from
an Indian resident or
from a person who uses
an IP address located in
India
Snapshot
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4. 4
Information
Technology
Telecommunications
• Direct software sales
• Provision of IT Services
• Cloud based SaaS models
• Subscription based access
• Customised software
• App developers and
operators
Industry Impact
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The equalisation levy 2.1 potentially can impact multiple businesses and business models, although in general the
business may not be operating a typical e-commerce model. Summary of industry impact is as follows:
• Global SMS and voice
aggregators
• Voice calls through
internet
• Video conferencing
Retail and Market
place
• Online sale of goods
• Online receipt of PO or
booking of a sale
• Online payment for
offline delivery of goods
• Facilitation of sale of
goods and services
Media and
Entertainment
• Global foreign university
courses in India
• Online examinations and
tests
• Online booking for travel
and stay
• Marketing support and
digital services etc.
Education/ Travel
and Others
• Internet based TV – OTT
• Gamming business
• Online subscriptions
• Online distribution of
global films
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5. 5
Quarter 1 – 30th June
Payment – 7th Jan
Payment – 31st March
Quarter 2 – 30th Sept
Quarter 3 – 31st Dec
Quarter 4 – 31st March
Payment – 7th October
Payment – 7th July
Compliance
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• PAN Based payment: e-commerce operator to obtain
PAN in India
• Quarterly payments, as per the due dates
• Annual statement/ return to be filed by 30th June of
the following financial year
• Interest, Penalty and prosecution to apply, if not
complied with the law
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Annual Return – 30th June

6. 6
Relevant questions to ponder
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Applicability
Whether I am an
e-commerce
operator?
Method
What is a digital
platform? Whether I
own one?
Service
Whether I provide
e-commerce
services?
Value
What does
consideration
mean? Is it income?
GST and EL
How does GST and
levy interact with
each other?
Royalty/FTS vs Levy
Whether I would
be double taxed on
royalties/ FTS + the
Levy?
Credits
Would credits be
available for levy
paid in India?
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7. 7
How can we support?
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Advice on potential opportunities to mitigate tax risk
Mitigate Risk
Handhold the management in terms of putting in right processes in
place to ascertain right amount of levy payable in India
Control
Analysing whether the company would be regarded as an e-commerce
operator and whether the transactions would fall under e-commerce
supply
Applicability
Assisting in the tax registration, quarterly compliance
and annual return along with facilitating payments for
the levy
Compliance
Review, re-structure of and advice on existing
business models and documentation
Structure and Design
04
05
02
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03
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8. 8
Contact us
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Mumbai Office :
TransPrice Tax Advisors LLP,
720, Ecstasy Business Park, City of Joy
Mulund West , Mumbai 400 080
Email: info@transprice.in
Office Phone: +91 22 25935424
Address
Contact Info
Telephone
Pune Office :
TransPrice Global Management Services
LLP
Third floor, Anand Nilay Business Center,
Kothurd, Pune 411 038
Delhi Office :
I-1 | Lower Ground Floor |
Jangpura Extension | New Delhi - 110014
Locations : Mumbai | Pune | Delhi | Hyderabad | Bangalore | Chennai | Ahmedabad
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