Equalisation levy - Google Tax of India.

Equalization Levy – Introduced in 2016 by Finance Act, was charged at 6% on online advertising and related services received by a permanent resident of India or a Non-resident having permanent establishment in India.

Finance Act 2020, amended the existing equalization levy and introduced an additional Equalization Levy of 2% on consideration received/receivable by an ecommerce operator.

‘E-commerce operator’ has been defined to mean a non-resident who owns, operates or manages a digital or electronic facility or platform for online sales of goods or online provision of services, or both.

Online advertising services covers following transaction:

Online sale of goods owned or online provision of services provided by ecommerce operator.

Online Sale of Goods or provision of services or both, facilitated by the ecommerce operator.

Equalization Levy will not be charged if the consideration is less than One Lakh rupees or if the Non-resident providing specified services has a permanent establishment in India.

Collection of Equalization levy in India:

During FY 2016-17: Rs. 338 Crores

During FY 2017-18: Rs. 589 Crores

During FY 2018-19: Rs. 939 Crores

India is not alone in taxing the digital transaction. Multiple European countries including France, UK, Greece and Italy have implemented digital transaction tax from this year while Asian countries like Vietnam and Malaysia have implemented a similar tax. 

Recently, the Government of the United States of America has also initiated an investigation of digital taxes levied by some countries, including India.

While digitalization has simplified many business and related processes but tax on digital transaction have given rise to tax challenges, which appear to be far from being solved.

CA Shubham Chhajed