Moneycontrol PRO
UPCOMING EVENT:Join us for New HorAIzon from Oct 6-7, 2pm and be a part of exciting conversations on tech & innovation
you are here: HomeNewsBusiness

Govt should keep in abeyance equalisation levy on non-resident e-commerce cos: Experts

Last month, a group of nine business bodies had written to Finance Minister Nirmala Sitharaman seeking deferment of 2 percent tax imposed on non-resident e-commerce companies.

May 24, 2020 / 06:46 PM IST

The government should consider keeping in abeyance the 2 percent equalisation levy on e-commerce companies as there are ambiguities surrounding its applicability, tax experts said. Budget 2020-21, presented in February, expanded the scope of "equalisation levy" to include consideration received by e-commerce operators from e-commerce supply or services.

The 2 percent levy came into effect from April 1, 2020.

Nangia Andersen Consulting Chairman Rakesh Nangia said the first instalment of equalisation levy would be payable in July 2020, but unsorted aspects such as double whammy caused on account of Section 10 (50) of the Income Tax Act, meaning and scope of the consideration received or receivable, tax registrations and compliances may create hardship to the non-resident taxpayers.

"The provisions of equalisation levy, as notified, has left a lot of ambiguities in terms of its application and procedures. Added to this is the business turmoil on account of COVID-19. In the best interest of business, the ideal approach should be to keep applicability of equalisation provisions in abeyance until issuance of necessary clarifications," Nangia said.

Last month, a group of nine business bodies, representing mostly American, European, Australian and Asian foreign companies, had written to Finance Minister Nirmala Sitharaman seeking deferment of 2 percent tax imposed on non-resident e-commerce companies by nine months due to the crisis triggered by COVID-19.


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

Follow our LIVE blog for the latest updates of the novel coronavirus pandemic

Non-resident e-commerce operators are those firms that sell goods and services to Indian residents online but do not have a presence in India.

Deloitte India Partner Neeru Ahuja said the legislation introduced is worded in a manner that is all-encompassing and the literal interpretation would include a very wide range of transactions – some of them not really digital transactions.

"A review of the legislation and providing clarifications to the industry about any unintended consequences would send a very positive signal to the industry," Ahuja added.

Shardul Amarchand Mangaldas & Co Partner Amit Singhania said the demand by industry to defer equalisation levy is certainly not unfounded and merits consideration as they feel it is not the right time for such a levy when many of the players are facing an existential situation.

"After the announcement of budgetary proposals on 1st February 2020, it appeared that the government would like to wait for the OECD report before making a move, however, the introduction of equalisation levy at the time of passing of Finance Act, 2020 came as a surprise to all," Singhania added.

The digital tax has been a vexed issue in international tax in recent years.

The Organisation for Economic Co-operation and Development (OECD) has produced multiple papers and alternatives for digital taxation but no consensus has been reached on a single approach by various governments worldwide.

"In the absence of any multilateral or globally agreed approach, countries have started imposing digital tax in different ways on a unilateral basis, recent examples are UK and other European nations," Ahuja added.

Equalisation levy was first introduced by Finance Act, 2016, at the rate of 6 percent on payments for digital advertisement services received by non-resident companies without a permanent establishment (PE) here, if these exceeded Rs 1 lakh a year.

The government expanded its scope in Budget 2020-21 to include consideration received by non-resident e-commerce operators from e-commerce supply or services. The rate applicable has been set at 2 percent.

Follow Moneycontrol's full coverage on the coronavirus pandemic here
first published: May 24, 2020 06:46 pm

stay updated

Get Daily News on your Browser
ISO 27001 - BSI Assurance Mark