The digital space has grown rapidly in the past few years. We
are surrounded by umpteen digital advertisements popping up every single minute
on our mobile phones. Online Service Providers are generating huge revenues
from online advertising. The biggest beneficiaries of this rapid growth in the
Digital Space are companies earning through Digital Ads like Google, Facebook,
Twitter, Linkedin, Yahoo and other advertising majors. However, they do not
have permanent establishment in the country in which they are providing
services and generating revenues.
Moreover, companies providing such services have permanent
establishment in countries which are subject to lower rate of tax and hence,
have created a new challenge for the revenue departments of the countries where
they do not have any permanent establishment.
Its defined
as “Tax leviable on consideration received or receivable for any specified
service under the provisions of this chapter”. The levy would be under a
separate self-contained code and is not part of the income-tax law.
Services Covered:
The
Equalisation Levy would be applicable at 6% on gross consideration payable for
a ‘Specified Service’.
‘Specified
Service’ is defined as follows:
(1)
Online advertisement;
(2) Any
provision for digital advertising space or facilities/ service for the purpose
of online advertisement;
(3) Any
other service which may be notified later.
Applicability:
The levy
will be applicable on the payments received by a non-resident service provider from
an Indian resident or an Indian Permanent Establishment (‘PE’) of a non-resident,
in respect of the specified service. The levy would not be applicable to non-resident
service providers having a PE in India, as they will be subjected to a regular PE
basis taxation. The levy is currently applicable only on B2B transactions, if
the aggregate value of consideration in a year exceeds approx USD 1500.
Who needs to comply:
Every resident person and foreign company (having a PE in India) is required to withhold Equalisation Levy while making payment to a non-resident service provider. The compliance procedure is similar to withholding tax compliances already prevalent in India.
Every resident person and foreign company (having a PE in India) is required to withhold Equalisation Levy while making payment to a non-resident service provider. The compliance procedure is similar to withholding tax compliances already prevalent in India.
Hemanth C
Articled Assistant, CA Finalist
Preetham Shetty & Co.
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