15 things you wanted to know about Equalisation Levy

 

  1. EQL stands for Equalisation Levy. It will be charged on digital service provided in India (mainly Advertising) by non-resident company. EQL is included in the Chapter VIII of the Finance Act 2016 effective from 1st June 2016 .EQL is also popularly called “Google Tax”.

It will be under the ambit of Equalisation Levy Rules, 2016

(Available at http://www.incometaxindia.gov.in/communications/notification/notification382016.pdf

  1. EQL @ 6% levied to curb a possibility by non-resident companies to escape any kind of Tax in India on all those non-resident entities who do not have any permanent establishment in India.
  2. EQL is chargeable to specified services of Advertisement only. It  include online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified
  3. To understand it perfectly, EQL is applicable to entities such as Google, Yahoo, Facebook etc. who earn huge revenues from India by providing digital service of Advertising. So any non-resident entity that does not have any permanent establishment in India will fall here. Yahoo/Google  charges Rs. 10,00,000 from Flipkart for providing advertising service, then Flipkart shall pay Yahoo/Google only Rs. 9,40,000 after charging EQL of Rs. 60,000 ( 10,00,000 @ 6%)
  4. EQL is only applicable to business to business (B2B) transactions. Businesses to consumer (B2C) transactions are exempt from such tax.
  5. EQL will be deductible at source, in similar way as withholding tax. Its operation will be same as TDS. The payment made to digital service provider will be only after deducting 6% as EQL. Threshold limit has been set as Rs.1Lac. It means if the specified services received by the service receiver is above Rs.1 lac during the year from the non-resident company, then EQL would be levied.
  6. Simple Interest @1% for delayed payment of EQL for every month or part of the month is delayed in payment of EQL
  7. Fails to deduct the whole or any part of EQL-A penalty equal to the amount of EQL shall be payable.
  8. EQL deducted but  fails to pay such levy – A penalty of Rs.1,000 for every day during which the failure continue, however penalty shall not exceed the EQL itself.
  9. In case an entity(service receiver) fails to charge EQL from the service provider then the EQL burden will be shifted to the recipient of the service i.e. service receiver
  10. Where any levy, interest or penalty is payable under EQL provision, a notice of demand specified in Form No.2 shall be served upon the taxpayer.
  11. As per Section 167 of Finance Act 2016, Rule 5 and 6, Annual return is required to be furnished electronically in Form No.1 on or before 30th June immediately following that financial year.
  12. Computation – EQL, interest and penalty payable shall be rounded off to nearest multiple of ten rupees
  13. Payment – EQL should be paid monthly through EQL challan by the 7th day of the month immediately following the month.
  14. Orders are appealable at CIT (A) (30 days ) & ITAT ( 60 Days )under Section 174 & Section 175 ,  Rule 8 of Finance Act 2016 with a fee of Rs. 1000/- .