Govt may tweak 2% equalisation levy to provide relief to local traders

The Central Board of Direct Taxes (CBDT) may tweak the equalisation levy imposed on the sale of goods or services carried out using a non-resident e-commerce operator.

Currently, a levy of 2 percent is paid by non-resident e-commerce operators on the gross amount of the transaction. However, experts believe the imposition of a levy results in double taxation in cases where the buyer and the seller are both resident Indians but carry out a transaction using a non-resident e-commerce platform like Amazon.

According to a report by The Economic Times, Kamlesh Varshney CBDT joint secretary has acknowledged that it is a "valid point."

"(There) may be situations where e-commerce participants are Indians and their gross consideration gets into the consideration of the e-commerce operators... There are issues and the government is not saying that all issues have been handled by the proposal in the Finance Bill,” Varshney had said. He said the issue will be considered at an "appropriate time."

The levy, when imposed in such cases leads to the non-resident e-commerce platform paying the levy collected from an Indian seller, who will again pay income tax on the profit generated from the transaction.

The United States Trade Representative (USTR) has called the levy "discriminatory, unreasonable, and burdens or restricts US commerce." The Ministry of Commerce & Industry has rejected the claim saying that it applies equally to all non-resident e-commerce operators, irrespective of their country of residence.

"The purpose of the Equalization Levy is to ensure fair competition, reasonableness and exercise the ability of governments to tax businesses that have a close nexus with the Indian market through their digital operations," the ministry had said in a statement.