Search Your Queries Related To Trilegal

Update

Budget 2021: Rationalisation Of Equalisation Levy Provisions (Part 2)

04 Mar 2021

Trilegal X WinPe Banner Image
The Finance Bill, 2021 proposes to clarify and rationalise Equalisation Levy provisions applicable to e-commerce supply of goods or services.

In April 2020, the provisions of 2% equalisation levy (EL) were introduced for taxing digital transactions and the consequent income earned by foreign e-commerce companies in India. At the time, it was specified that EL would not be levied on the business income earned by a non-resident e-commerce operator from supply of service which is effectively connected to its permanent establishment (PE) in India. However, there was ambiguity on the scope of EL regarding other income streams of a non-resident e-commerce operator such as royalty and fee for technical services.

Another issue that arose was in relation to the scope of EL on transactions which were conducted partly online and partly offline. Additionally, there was a mismatch between the effective date of provisions of EL i.e. 1 April 2020 and the exemption from income tax provisions to e-commerce transaction to which EL applied which started from 1 April 2021, thereby resulting in double taxation for such transactions for a period of one year.

These issues have been resolved through proposals presented in the Finance Bill, 2021 (Bill) as discussed below.

  • Royalty and fees for technical services payments excluded from the ambit of EL

    The Bill clarifies that any consideration received or receivable for specified services and e-commerce supply of goods or services will not include consideration which is taxable as royalty or fees for technical services (FTS) in India under the Income Tax Act (ITA) read with the relevant treaty provisions. This is a welcome clarification as all licensing arrangements going forward will not be subject to EL once income tax has been paid on such royalty/FTS income earned from India.

  • Applicability of EL widened

    EL is to be levied at the rate of 2% of the amount of consideration received or receivable by an e-commerce operator from ‘e-commerce supply or services’ made or provided or facilitated to specified persons. The definition of ‘e-commerce supply or services’ includes within its ambit ‘online sale of goods’ and ‘online provision of services’ and the Bill proposes activities that would be included within the ambit of ‘online sale of goods’ and ‘online provision of services’. The impact of this amendment is that EL would be applicable even if a part of the transaction is concluded online.

Download PDF to read more

Subscribe to our Knowledge Repository

If you would like to receive content directly in your inbox from our knowledge repository, please complete this subscription form. This service is reserved for clients and eligible contacts.







    Disclaimer

    Under the rules of the Bar Council of India, Trilegal is prohibited from soliciting work or advertising in any form or manner. By accessing this website, www.trilegal.com, you acknowledge that:

    • You are seeking information about Trilegal of your own accord and there has been no form of solicitation, advertisement or inducement by Trilegal or its members.
    • This website should not be construed as providing legal advice for any purpose.
    • All information, content, and materials available on this website are for general informational purposes only.
    • Any information obtained or material downloaded from this website is completely at the user’s volition, and any transmission, receipt or use of this website is not intended to, and will not, create any lawyer-client relationship.
    • Information on this website may not constitute the most up-to-date legal or other information. Trilegal is not liable for the consequences of any action taken by any person based on any material or information available on this website, or for any inaccuracy in or exclusion of any information or interpretation thereof.
    • Readers of this website or recipients of content or information available on this website should not act based on any or all such content or information, and should always seek advice of competent legal counsel licensed to practice in the appropriate jurisdiction.
    • Third party links contained on this website re-directing users to such third-party websites should neither be construed as legal reference / legal advice, nor considered as referrals to, endorsements of, or affiliations with, any such third party website operators.
    • The communication platform provided on this website should not be used for exchange of any confidential, business or politically sensitive information.
    • The contents of this website are the intellectual property of Trilegal.

    We prioritize your privacy. Before proceeding, we encourage you to read our privacy policy, which outlines the below, and terms of use to understand how we handle your data:

    • The types of information we collect and why we collect them.
    • How we use your information to provide a personalized experience.
    • The measures we take to ensure the security of your data.
    • Your rights and choices in managing your personal information.
    • How we may share information with trusted partners for specific purpose.

    For more information, please read our terms of use and our privacy policy.

    Up arrow