SUMMARY
The Income Tax department made changes to the form for equalisation levy of 2% on digital transactions
The modified challan now has an ‘Outside India’ option for the payee to enter details and pay the dues
The equalisation levy paid by foreign MNCs, till last year, applied only to digital advertising services
Foreign companies such as Amazon, Flipkart and Netflix may fail to comply with the July 7 deadline for paying equalisation levy, also called Google Tax or Digital Tax, while they wait for the government’s clarification and the much-awaited ‘Frequently Asked Questions’ (FAQs) list.
On Saturday, the Income Tax department made changes to the form used to pay the equalisation levy to facilitate the payment of the 2% levy on digital transactions in India by foreign e-commerce companies.
The modified challan on the website now has an ‘Outside India’ option for the payee to key in their details and complete the payment due.
The government, through the Finance Act 2020, had imposed a 2% levy on digital transactions, trade and services by non-resident e-commerce operators with a turnover of over INR 2 crore, expanding the scope of the equalisation levy, which till last year only applied to digital advertising services. The new levy, introduced in the Union Budget, came into effect on April 1, with the first instalment due on July 7.
Foreign companies are struggling with issues such as forex conversion rates for payment and obtaining permanent account number (PAN). Many of them are now hoping for a last-minute relaxation of the deadline by the government.
“This has rather imposed a burdensome and challenging task for non-resident e-commerce players to apply for and obtain PAN within one business day in the midst of curbs, lockdown and pandemic affected business life and also organise the mode of payment through an Indian bank account or debit card issued by an Indian Bank,” Sandeep Jhunjhunwala, partner, Nangia Andersen LLP told Economic Times.
US Says Digital Taxes Discriminating Against American Companies
The move comes amid the US’ investigation of whether digital taxes imposed by India and nine other countries discriminate against American companies.
The imposition of the 2% levy shows that the Indian government didn’t pay heed to the representation of foreign companies when they had asked for the levy to be deferred by a year.
In May this year, foreign companies had approached the Central Board of Direct Taxes with their suggestions regarding the equalisation levy imposed on them by the government. According to an Inc42 report, companies were seeking clarification about the definition of online sale of goods, services, and digital/electronic platforms. They also added that the equalisation levy should be charged only on the facilitation fee for each transaction and not on the transaction amount as a whole, as had been decided under the new rules that went into effect in April 2020.
In 2016, equalisation levy at the rate of 6 per cent was first introduced on online advertisement services. The government netted around INR 1,000 Cr from the levy in 2018-19.
