{"id":6905,"date":"2020-04-08T17:46:46","date_gmt":"2020-04-08T12:16:46","guid":{"rendered":"http:\/\/itatonline.org\/articles_new\/?p=6905"},"modified":"2020-04-08T17:46:46","modified_gmt":"2020-04-08T12:16:46","slug":"equalisation-levy-an-essential-legislative-reform-to-prevent-tax-evasion-by-foreign-e-commerce-entities","status":"publish","type":"post","link":"https:\/\/itatonline.org\/articles_new\/equalisation-levy-an-essential-legislative-reform-to-prevent-tax-evasion-by-foreign-e-commerce-entities\/","title":{"rendered":"Equalisation Levy: An Essential Legislative Reform To Prevent Tax Evasion By Foreign E-commerce Entities"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/itatonline.org\/articles_new\/wp-content\/uploads\/snehal.png\" alt=\"\" width=\"75\" height=\"98\" class=\"alignleft size-full wp-image-6673\" \/><strong>Snehal Kanzarkar, a law student, has explained the amendments brought by the Finance Act 2020 relating to equalization levy. She has also explained  the need for the levy, its scope, exceptions and the reforms brought in by the Finance Act 2020. She has delved into the major challenges involved in the implementation of the levy and proposed suggestions for resolution of the issues. The author has argued that equalization levy is a much required reform for prevention of tax-evasion by foreign e-commerce entities. She has, however, suggested that the implementation of the same may be deterred till the challenges posed by COVID-19 are resolved because a majority of the required services are provided online <\/strong><\/p>\n<h2>Introduction<\/h2>\n<p>Equalization levy has been  defined as follows in section 164 (d) of the <a href=\"https:\/\/www.cbic.gov.in\/resources\/htdocs-cbec\/fin-act2016.pdf\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>Finance Act, 2016<\/strong><\/a>  as follows: <\/p>\n<p><em>&ldquo;Equalisation levy means the  tax leviable on consideration received or receivable for any specified service  under the provisions of this Chapter (Chapter VII, Finance Act, 2016)&rdquo; <\/em><\/p>\n<p><!--more--><\/p>\n<p>The Finance Act, 2016  incorporated the recommendations of the <em>Akhilesh Ranjan Committee <\/em><strong>[<a href=\"https:\/\/incometaxindia.gov.in\/News\/Report-of-Committee-on-Taxation-of-e-Commerce-Feb-2016.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Proposal  for Equalization Levy on Specified Transactions, February 2016, Report of  Committee on Taxation of E-commerce<\/a>, ]<\/strong>(Hereinafter  referred to as &ldquo;Equalisation Levy Report, 2016&rdquo;). It defined Equalisation Levy  as follows ( Page 86): <\/p>\n<p>    <em>&ldquo;<\/em><em>Equalization Levy is intended to be a tax imposed in accordance with  the conclusions of the BEPS Report on Action 1 that has been endorsed by G-20  and OECD, on payments made for digital services to foreign beneficial owner,  who enjoy an unfair advantage over their Indian competitors providing similar  services by digital or more traditional means, with the objective for  equalizing their tax burden with other businesses that are subjected to  income-tax in India, without disturbing the existing tax treaties.&rdquo;<\/em><\/p>\n<p>This measure was introduced by  the means of Finance Act, 2016 on the basis of the recommendations given in the  Equalization levy report. On a general basis, any changes in taxation are  introduced by the means of amendments to the Income Tax Act, 1961 (Hereinafter  referred to as &ldquo;IT Act&rdquo;), Central Goods and Services Tax Act, 2017 (Hereinafter  referred to as &ldquo;CGST Act&rdquo;), Integrated Goods and Services Tax Act, 2017  (Hereinafter referred to as &ldquo;IGST Act&rdquo;) or any other legislation or treaty for  taxation. This route however was not followed for the introduction of the  Equalization levy for the following reasons, as listed in the Equalization Levy  report, 2016 (Page 86): <\/p>\n<ul>\n<li><span dir=\"ltr\">Equalisation levy was not  introduced through tax treaties because of the divergent opinions of the  nations on it. The lack of consensus amongst the nations to implement the levy  would have it nearly impossible for the levy to be incorporated in the regulatory  framework through the treaties. <\/span><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\">It was not introduced through the  Income Tax Act, 1961 because it is not a tax. It is a tax on a transaction. It  is a levy imposed on the revenue generated through&nbsp; which escapes from domestic legislation and  the treaties. <\/span><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\">Due to its nature i.e. tax on  transaction, it was through the Finance Act, 2016 on the lines of the service  tax and securities transaction tax.<\/span><\/li>\n<\/ul>\n<p>Equalization levy was introduced  to counter the problem of the escapement of revenue generated through electronic  services from the taxation. However, every e-commerce service is not covered  within the ambit of equalization levy. The scope of equalization levy has been  defined in the Finance Act, 2016. It is an exhaustive definition, in the sense,  that it does not give scope for liberal and expansive interpretation of the  scope of the levy. Only the services explicitly mentioned in the Act are  covered within the ambit of equalization levy. <\/p>\n<p>Since, the provisions leading to  the introduction and implementation of equalization levy were introduced by the  Finance Act, 2016 and not through amendments in any legislation for taxation,  the amendments for equalization levy, in the Finance Act, 2020 were through the  means of amendment to the Finance Act, 2016. However, in order to implement and  support the equalization levy smoothly certain ancillary provisions were  introduced by the means of amendments to various taxation legislations such as  the Income Tax Act, 1961, Central Goods and Services Act, 2017, Integrated Goods  and Services Tax Act, 2017 and Customs Act, . This article aims to elaborate  upon the reforms introduced for the taxation of the digital economy in India by  the means of all these legislations and hence, it is divided into the following  parts, covering one legislation each i.e. Reforms and Amendments made through  the Finance Act, 2016 and Finance Act, 2020 [i] Amendments to the Income Tax  Act, 1961 [ii] Amendments to the CGST Act, 2017 and IGST Act, 2017 [iii],  followed by the concluding remarks. <\/p>\n<h2>Finance Act, 2016 and Finance Act, 2020<\/h2>\n<p>For the reasons mentioned above,  Equalisation levy was introduced through the Finance Act, 2016. Further reforms  to the provisions were incorporated by the Finance Act, 2020, through amendment  to the Finance Act, 2016. This section deals with the need for equalization  levy [i] scope of equalization levy [ii] and the amendments made to the  provisions of equalization levy through the Finance Act, 2020 [iii].&nbsp; <\/p>\n<h3>Need  for the Introduction of Equalization levy<\/h3>\n<p>The multi-national enterprises  and various individuals have been benefitting out of the loopholes in the DTAAs  and the domestic tax legislations regarding the regulation of digital economy.  The BEPS Action Plan 1 was devised to analyze the situation and come up with  solutions for tacking the challenges posed by the digital economy. This Action  Plan 1 was primarily relied upon by the committee set up by the Government for  regulation of taxation of e-commerce in India,  in its report, &ldquo;Proposal on Equalisation Levy&rdquo;. This committee opined that  Equalization levy was required to be introduced for attaining the objective of  providing greater &ldquo;clarity, certainty and predictability&rdquo; in terms of the  taxation of the digital services and to reduce the cost of compliance. Despite  the DTAAs, withholding tax and various other provisions under the IT Act, the  measure of equalization levy was required to tax the income earned over  services and transactions over digital platforms. It is important to understand  that equalization levy is different from the provisions in the DTAAs and the  domestic legislations for taxation in India  and is required for taxation of digital transactions which escape the tax net.  There are a few questions which are often raised regarding the veracity of  equalization levy. It is important to understand the discussion regarding these  aspects in the Equalization Levy Report, 2016, to get a clarity regarding the  nature of the equalization levy:<\/p>\n<ul>\n<li><span dir=\"ltr\"><strong>Difference between Equalization levy and withholding tax: <\/strong>Withholding  tax, under the IT Act, is considered to be an effective measure for tacking the  problem of tax evasion. Thus, the introduction of Equalization levy with a  similar objective under Finance Act, 2016 was questioned in terms of its  purpose and efficiency. The <em>Akhilesh Ranjan Committee <\/em>observed in its  report that withholding tax is different from Equalisation levy because of  Withholding tax is a tax on income, while Equalisation levy is a tax on the  consideration paid.<strong><\/strong><\/span><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\"><strong>Scope of equalization levy<\/strong>:  Equalisation levy was covered under chapter VII of the Finance Act, 2016. It  was first implemented at the of 6% on the consideration for the services  received\/ receivable by a <strong>non-resident <\/strong>from a person being <strong>resident  of India and carrying on business or profession [i] <\/strong>&nbsp;or <strong>a non-resident having a permanent  establishment in India [ii] <\/strong>[Section 165, Finance Act, 2016]. Equalisation  levy was implemented on consideration received\/ receivable for specified  service, i.e. online advertising, any provision for online advertising space or  any other facility or service for online advertisement (and any other service  specified by Central Government in this regard). Online has been accorded a  wide and exhaustive definition by the Act i.e. it includes any <\/span>facility  or service or right or benefit or access that is obtained through the internet  or any other form of digital or telecommunication network.<strong>[Sections 164 (i),  164 (f) Finance Act, 2016]<\/strong><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\"><strong>Exceptions to the collection of  Levy: <\/strong>An exception from liability to pay Equalisation levy was carved out  for following cases\/ persons <strong>[Section 165 Finance Act, 2016]<\/strong>: <\/span><\/li>\n<\/ul>\n<ul>\n<ul>\n<li><span dir=\"ltr\">The non-resident providing the  specified service <\/span><strong>has a permanent establishment in <\/strong><strong>India<\/strong><strong> and the specified service is effectively connected with such permanent  establishment. <\/strong>The rationale of this exception can be understood to be that  the non-residents having the liability of a permanent establishment should not  be benefitted from this provision as the tax rates for permanent establishments  are very high and not creating an exception for permanent establishments might  benefit them with lower tax rate.<strong><\/strong><\/li>\n<\/ul>\n<\/ul>\n<ul>\n<ul>\n<li><span dir=\"ltr\">The aggregate amount of consideration for specified service received or  receivable in a previous year by the non-resident from a person resident in <\/span>India  and carrying on business or profession, or from a non-resident having a  permanent establishment in India, <strong>does not exceed one lakh rupees<\/strong>. This threshold was introduced in line  with the proposals of the Equalisation Levy Report, 2016 i.e. the small  payments by MSMEs or for personal purposes should not be adversely affected by  the Equalisation Levy. [<strong>Explanatory notes to Finance Act, 2016: <a href=\"https:\/\/www.incometaxindia.gov.in\/communications\/circular\/circular03_2017.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Circular  No.- 3\/2017<\/a>, para 32]<\/strong>.<\/li>\n<\/ul>\n<\/ul>\n<ul>\n<ul>\n<li><span dir=\"ltr\">If the payment for the specified service by the person resident in  India, or the permanent establishment in India is <\/span><strong>not for the  purposes of carrying out business or profession<\/strong>. This exception was carved  out again in compliance with the recommendations of Equalisation Levy Report,  2016 i.e. the payments not made for business purposes should not be taxed by  Equalisation Levy. <\/li>\n<\/ul>\n<\/ul>\n<p>Despite the implementation of the  Equalisation Levy, certain services were left out of its purview. With the  implementation of the Equalisation levy the need for modification and  improvement was felt. Thus, certain amendments were made to the Finance Act,  2016 and other provisions relating to Equalisation Levy for the purpose of  solving the problems and challenges arising from its implementation. <\/p>\n<h3>Changes  brought in the Provision of Equalization levy<\/h3>\n<p><strong><a href=\"https:\/\/egazette.nic.in\/WriteReadData\/2020\/218938.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Finance Act, 2020 <\/a><\/strong>has  made several amendments in the Finance Act, 2016. The provisions have been  amended to incorporate changes for better administration: <\/p>\n<p>1. Scope:  The services provided by the e-commerce operators have also brought within the  ambit of the Equalization Levy.The following changes were incorporated: <\/p>\n<ul>\n<li><span dir=\"ltr\">The scope of the Chapter VII of  the Finance Act, 2016 was modified to include the consideration received or  receivable for the e-commerce supply or services made after <\/span>April, 1, 2020. <strong>[Section 153,  Finance Act, 2020]<\/strong><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\">E-commerce supply or services  includes online sale of goods by e-commerce operator, online provision of  services by e-commerce operator, sale of goods or provision of&nbsp; services through a platform operated by the  e-commerce operator or any combination of these activities. <\/span><strong>[Section  164 (cb), Finance Act, 2020]<\/strong><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\">E-commerce operators have been  defined as <\/span>a non-resident who owns, operates or manages digital or  electronic facility or platform for online sale of goods or online provision of  services or both <strong>[Section 164 (ca), Finance Act, 2020]<\/strong><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\">Equalization levy at the rate of  2% has been made applicable to the consideration received or receivable for the  services provided by the e-commerce operators to a person resident in India, a  person who buys goods, services or both using an Internet Protocol located in  India or a non-resident if the non-resident is involved in sale of  advertisement, targeted at customer who is resident in India or who has access  to the advertisement through a internet protocol address located in India or is  involved in sale of data, collected from a person resident in India or. Person  who uses and internet protocol which is located in <\/span>India <strong>[Section 165A, Finance Act, 2020]<\/strong>.<\/li>\n<\/ul>\n<p><strong>2. Exceptions  to the Equalization levy<\/strong>: The e-commerce operator providing services or  supplying goods will not be charged equalization levy, if it has a permanent  establishment in India and such supply or services is related to the permanent  establishment, if the service or supply is chargeable under section 165 of the  Finance Act, 2016 or if the sales, turnover or gross revenue of the e-commerce  operator is less than Rs. 2 crores during the previous year. <strong>[Section 165A,  Finance Act, 2020]<\/strong>. <\/p>\n<p><strong>3. Compliance  requirements<\/strong>: The equalization levy paid at the rate of 5% for all other  specified services , except the services or supply from e-commerce operator,  has to be given by the customers to the Central Government. While, in case of  the supply and services of e-commerce operators, the equalization levy has to  be deducted by the e-commerce operators themselves and has to be given to the  Central Government. <strong>[Section 166, Finance Act, 2016; Section 166A, Finance  Act, 2020]<\/strong><\/p>\n<p>In essence, Finance Act, 2020 has  amended the Finance Act, 2020 to incorporate equalization levy provisions for  taxing e-commerce operators. <\/p>\n<h2>Amendments in the Income Tax Act, 1961<\/h2>\n<p>The aspects of direct taxation  are discussed in reference of the amendments to the Income Tax Act, 1961 by the  Finance Act, 2020. The concept of Significant Economic presence was first  introduced in the Income tax Act, 1961 by the means of an amendment through the  Finance Act, 2018. Income Tax Act, 1961, CGST Act, 2017 and IGST Act, 2017 were  amended by the Finance Act, 2020 to incorporate further reforms. This part is  sub-divided in various sections which elaborate upon the amendments in  reference to significant economic presence.<\/p>\n<p>The concept of Significant  Economic Presence was first introduced by the Finance Act, 2018 <strong>[Section 4,  <a href=\"https:\/\/egazette.nic.in\/writereaddata\/2018\/184302.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Finance Act, 2018<\/a><\/strong><a href=\"https:\/\/egazette.nic.in\/writereaddata\/2018\/184302.pdf\"><\/a><strong>]<\/strong>.  It amended section 9 of the IT Act. Explanation 2A was inserted in section 9,  to clarify that significant economic presence of a non-resident would  constitute business connection. The Finance Act, 2020 amended the Finance Act,  2018 Significant Economic Presence. The explanation 2A inserted by Finance Act,  2018 was scraped and new explanations 2A and 3A was inserted in section 9 of  the IT Act, which are as follows: <\/p>\n<p>&ldquo;<em>Explanation <\/em>2A.&mdash;For the removal of doubts, it is hereby declared that the significant  economic presence of a non-resident in India  shall constitute &ldquo;business connection&rdquo; in India  and &ldquo;significant economic presence&rdquo; for this purpose, shall mean&mdash; <\/p>\n<p>(<em>a<\/em>)  transaction in respect of any goods, services or property carried out by a  non-resident with any person in India including provision of download of data  or software in India, if the aggregate of payments arising from such  transaction or transactions during the previous year exceeds such amount as may  be prescribed; or <\/p>\n<p>(<em>b<\/em>)  systematic and continuous soliciting of business activities or engaging in  interaction with such number of users in India,  as may be prescribed: <\/p>\n<p>Provided that  the transactions or activities shall constitute significant economic presence  in India,  whether or not&mdash; <\/p>\n<p>(<em>i<\/em>)  the agreement for such transactions or activities is entered in India;  or <\/p>\n<p>(<em>ii<\/em>)  the non-resident has a residence or place of business in India;  or <\/p>\n<p>(<em>iii<\/em>)  the non-resident renders services in India: <\/p>\n<p>Provided  further that only so much of income as is attributable to the transactions or  activities referred to in clause (<em>a<\/em>) or clause (<em>b<\/em>) shall be  deemed to accrue or arise in India.&rdquo;<\/p>\n<p>&ldquo;<em>Explanation <\/em>3A.&ndash;&ndash;For the removal of doubts, it is hereby declared that the income  attributable to the operations carried out in India,  as referred to in <em>Explanation <\/em>1, shall include income from&ndash;&ndash; <\/p>\n<p>(<em>i<\/em>)  such advertisement which targets a customer who resides in India  or a customer who accesses the advertisement through internet protocol address  located in India; <\/p>\n<p>(<em>ii<\/em>)  sale of data collected from a person who resides in India  or from a person who uses internet protocol address located in India;  and <\/p>\n<p>(<em>iii<\/em>)  sale of goods or services using data collected from a person who resides in  India or from a person who uses internet protocol address located in India.&rdquo;; <\/p>\n<p>(<em>iv<\/em>)  after <em>Explanation <\/em>3A as so inserted, the following proviso shall be  inserted with effect from the 1st day of April, 2022, namely:&ndash;&ndash; <\/p>\n<p>&ldquo;Provided  that the provisions contained in this <em>Explanation <\/em>shall also apply to  the income attributable to the transactions or activities referred to in <em>Explanation <\/em>2A.&rdquo;<\/p>\n<p>The threshold for SEP has not  been notified by the Government yet. The transactions of the e-commerce  operators which trigger the equalization levy, also lead to generation of  income under this explanation. However, in order to avoid taxation of the  non-resident e-commerce operators, an exception has been created under the  Income Tax Act, 1961.Any income arising from any specified service, chargeable  to equalization levy is not included in computing the total income, for the  purpose of Income Tax Act, 1961. [Section 10 (50), Income Tax Act, 1961]&nbsp; The report of OECD regarding taxation of  Digital Economy is likely to be released by December, 2020 and thus, the  threshold will be set after considering the OECD report. <\/p>\n<h2>Challenges  in Implementation of Equalisation levy<\/h2>\n<p>These  amendments for the taxation of the digital economy, though well-intended, have  led to certain challenges in implementation of the same. They are:<\/p>\n<ul>\n<li><span dir=\"ltr\"><strong>Constitutional Validity of Equalisation levy<\/strong>: Constitutional  validity of Equalization levy is in question because of the mode of legislation  of the equalization levy and the power of the conflict in the subject matter of  the states and Centre. Article 265 of the <a href=\"https:\/\/legislative.gov.in\/sites\/default\/files\/COI-updated.pdf\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>Constitution of India<\/strong><\/a> states that:<\/span><\/li>\n<\/ul>\n<p align=\"center\">&ldquo;No tax can be  imposed except with the authority of law.&rdquo;<\/p>\n<p>There are three lists under Schedule VII of  the Constitution of India i.e. Union List, State List and Concurrent List. The  Central government can legislate upon the subjects in the Union list, the State  Government can legislate on the subjects in the state list and both Central and  state government can legislate on the subjects of the concurrent list, but in  case of contradiction, the law legislated by the Central Government will  prevail. Equalization levy is being questioned on two fronts i.e. the  incorporation through Finance Act, rather than Income Tax Act and the potential  encroachment of the powers of the State government by the central government.  The first issue has been dealt with in the earlier section. Entry 97 of List I  covers &ldquo;any other matter not enumerated in List II or List III including any  tax not mentioned in either of those lists&rdquo;. Thus, the fact that &ldquo;Equalization  levy&rdquo; or &ldquo;tax on advertising&rdquo; is not mentioned in the List II or List II can be  the basis for the Centre to legislate on this subject matter. But, the Entry 55  of List II covers &ldquo;Taxes on advertisements other than advertisements published  in newspapers and advertisements broadcast by the radio or television&rdquo;. <strong>[<a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2850608\" target=\"_blank\" rel=\"noopener noreferrer\">The  Indian Equalisation Levy: Inelegant but not Unexpected<\/a>, Shreya Rao, NLS  Business Law Review, 2016<\/strong><a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2850608\"><\/a>]<\/p>\n<p>In order to resolve this deadlock, it is pertinent  to understand the purpose of equalization levy. The primary purpose of  equalization levy is to tax transactions on online mode. This includes multiple  transactions, such as supply of goods, provision of services, advertising,  marketing, promotional services and payment for reserving space on online  medium for advertising. &ldquo;Advertisement (other than through newspaper, radio or  television)&rdquo; is not the essence of the targeted transactions. It happens to be  one of the subject matters on which the Centre legislated ancillary. It cannot  be challenged on the basis of the pith and substance doctrine as the pith and  substance of the area of legislation is within the powers of the Central  government and the incidental encroachment upon the subject matter of the state  cannot be a ground for declaring the legislation unconstitutional.<\/p>\n<ul>\n<li><span dir=\"ltr\"><strong>Potential challenge under  National Treatment on Internal taxation and Regulation under GATT<\/strong>: The  exclusion of domestic e-commerce operators from the definition can trigger the  problem of national treatment i.e. if a tax is implemented only on foreign  e-commerce operators. It can be argued that the services provided by domestic  e-commerce operators are taxed separately from the services provided by the  foreign e-commerce operators. This principle is applicable exclusively in case  of the imports and thus, if any products are supplied by the e-commerce  operator (non-resident) to Indian residents, are taxed by equalization levy and  same products supplied by domestic e-commerce operator are not subject to it,  the national treatment principle under GATT can be violated and this action can  be challenged at WTO. In order to avoid this, <\/span>India will have to incorporate the provision,  creating an exception in all its Double Taxation Avoidance Agreements.  Alternatively, if significant economic presence and equalization levy are  proposed and accepted by the nations in the next negotiation on BEPS Action  Plan 1, it can be a possible safeguard for India. <strong>[Article III, <a href=\"https:\/\/www.wto.org\/english\/docs_e\/legal_e\/gatt47.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">General Agreement on  Tariffs and Trade, 1947<\/a>] <\/strong><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\"><strong>Treaty Override: <\/strong>Since,  Equalisation levy is not accepted to be a part of the Double Taxation Avoidance  agreements or the Multilateral Instrument, it is difficult to implement it  against various nations. The nations are unlikely to agree to equalization levy  or even if they do, it might be a long and tedious process. Hence, it is safe  to say that it can be implemented against various nations only if it is a part  of the domestic law. Thus, the potential solution was to implement it through  domestic law, it is accepted by all the nations and becomes a part of the DTAAs  and the international law. An exception can be created to the DTAAs, only if  the domestic tax is a tax on income. Thus, India&rsquo;s approach to not to include  the equalization levy as &lsquo;income tax&rsquo; but &lsquo;transaction tax&rsquo; can be perceived as  a potential means of treaty override. <strong>[<a href=\"https:\/\/www.taxsutra.com\/experts\/column?sid=607\" target=\"_blank\" rel=\"noopener noreferrer\">Equalisation Levy- A Case of Treaty  Override? Part II<\/a>, Mr. Rahul K Mitra (Partner KPMG), <\/strong><\/span><strong>May 9,   2016<\/strong><strong>] <\/strong><\/li>\n<\/ul>\n<ul>\n<li><span dir=\"ltr\"><strong>Applicability of Equalisation  Levy in certain cases: <\/strong>Clarification is required in terms of applicability  of equalization levy in certain cases as the law is silent on that. For  example, the applicability of equalization levy is unclear if the total  transaction amount satisfies the threshold, but the discounted sale price is  below the threshold value or when the products supplied by the non-resident  e-commerce operator are returned by the customer and the equalization levy is  already paid, the provision for rebate of the equalization levy is absent from  the legislation. Thus, clarificatory provisions should be released by the CBDT  in this regard. <strong>[<a href=\"https:\/\/www.bloombergquint.com\/law-and-policy\/new-tax-burden-on-foreign-e-commerce-companies-the-problem-of-two-hows\" target=\"_blank\" rel=\"noopener noreferrer\">New Burden on Foreign E-Commerce Companies: The Problem of  two Hows<\/a>, Payaswini Upadhyay, <\/strong><\/span><strong>March, 31 2020<\/strong><strong>]<\/strong><\/li>\n<\/ul>\n<h2>Conclusion<\/h2>\n<p>In conclusion, it can be said  that equalization levy was a much required step for preventing the tax evasion  by non-resident e-commerce operators, but the mechanism adopted for the incorporation  of this provision has led to potential problems. However, the entire scenario  can drastically change on the basis of the OECD report on taxation of the  digital economy, which is slated to be released in December, 2020. However,  before the implementation of this levy the unique situation created by COVID-19  has to be considered. In light of the pandemic, majority of the work has been  shifted online and various services are being provided online now. The  implementation of the extra 2% levy might be deterrent to the required  services provided online and harm the economy and people further. Thus, the  implementation of the Equalisation levy on e-commerce operators should be  deterred till this extraordinary problem is resolved. <\/p>\n<table width=\"103%\" border=\"1\" cellpadding=\"5\" cellspacing=\"0\" bgcolor=\"#FFFFCC\">\n<tr>\n<td><strong>Disclaimer: <\/strong>The  contents of this document are solely for informational purpose. It does not  constitute professional advice or a formal recommendation. While due care has  been taken in preparing this document, the existence of mistakes and omissions  herein is not ruled out. Neither the author nor itatonline.org and its  affiliates accepts any liabilities for any loss or damage of any kind arising  out of any inaccurate or incomplete information in this document nor for any  actions taken in reliance thereon. No part of this document should be  distributed or copied (except for personal, non-commercial use) without  express written permission of itatonline.org<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>Snehal Kanzarkar, a law student, has explained the amendments brought by the Finance Act 2020 relating to equalization levy. She has also explained  the need for the levy, its scope, exceptions and the reforms brought in by the Finance Act 2020. She has delved into the major challenges involved in the implementation of the levy and proposed suggestions for resolution of the issues. The author has argued that equalization levy is a much required reform for prevention of tax-evasion by foreign e-commerce entities. She has, however, suggested that the implementation of the same may be deterred till the challenges posed by COVID-19 are resolved because a majority of the required services are provided online<\/p>\n<div class=\"read-more\"><a href=\"https:\/\/itatonline.org\/articles_new\/equalisation-levy-an-essential-legislative-reform-to-prevent-tax-evasion-by-foreign-e-commerce-entities\/\">Read more &#8250;<\/a><\/div>\n<p><!-- end of .read-more --><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-6905","post","type-post","status-publish","format-standard","hentry","category-articles"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts\/6905","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/comments?post=6905"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts\/6905\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/media?parent=6905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/categories?post=6905"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/tags?post=6905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}