SKP Tax Alert
Volume 9 Issue 7 |
Equalisation Levy Rules, 2016 notified

With an intention to resolve tax challenges in the digital economy, the Indian government had proposed to incorporate the equalisation levy in the Finance Act, 2016 as per the recommendation under the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting (BEPS) Action 1. Recently, the Central Board of Direct Taxes (CBDT) notified the Equalisation Levy Rules[1], 2016 (the Rules) and issued a circular stating that it would be applicable from 1 June 2016.

Charge of equalisation levy
  • Equalisation levy at the rate of 6% will be charged on the amount of consideration for any specified services received/receivable by a non-resident person from a person residing in India and carrying out a business or profession, or from a non-resident having a permanent establishment in India i.e. the service recipient.
  • The term ‘specified service’ is defined as 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 by the central government in this regard.
Collection and recovery of equalisation levy
  • Equalisation levy is to be withheld by the service recipient and paid to the credit of the central government by the seventh day of the month succeeding the calendar month in which the consideration towards a specified service is paid or payable.
  • While making payments to a non-resident service provider, every service recipient is required to withhold and pay equalisation levy to the credit of the central government by remitting it to the Reserve Bank of India or any other authorised bank through an equalisation levy challan (official form).
Key summary of the Rules
  • The service recipient is required to furnish the ‘statement of specified services’ electronically through a digital signature or electronic verification code, for all the specified services chargeable to equalisation levy during any financial year on or before 30 June immediately following that financial year.
  • The Rules define the process for issuance of the notice of demand by the Assessing Officer in the event of non-filing of the ‘statement of specified services’ by the service recipient.
  • The Rules also prescribe forms for filing an appeal before the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal.
SKP’s Comments
The Rules notify various forms and provide clarity on the process to be followed for the collection of equalisation levy. Presently, besides the specified services defined in the notification, no additional services are notified.

However, clarity with respect to the format of the challan and payment gateway is still needed. Furthermore, there are no corresponding changes made to Form 15CB/15CA for disclosing the payment of the levy at the time of remittance. It is also important to note that there may be more changes as the law evolves.
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