About:
The Equalization Levy was first introduced by the Finance Act, 2016 on non-resident business. Equalization levy is imposed at 6% on specified services such as online advertisement and digital advertising space or any other facility or service for the purpose of online advertisement.
It is mandatory for Indian business residents to deduct the amount of the equalization levy before making payment to a non-resident business for such specified services and to remit the amounts to the government.
Equalization levy is applicable to E-commerce operators. An E-commerce operator is defined as a person who owns, operates, or manages a digital or electronic facility or platform for the online sale of goods or the online provision of services.
Equalisation Levy tax is required to be deducted by the service recipient if two conditions mentioned below are satisfied:
- The payment must be made to a non-resident service provider;
- The amount exceeds Rs. 1,00,000 during the financial year to one service provider.
The following services are covered under equalization levy:
- Online advertisement and,
- Any provision for digital advertising space or facilities or service for the purpose of online advertisement
Rate of Tax Under Equalization Levy
The applicable rate is 6% of the gross consideration.
Due Dates for Compliance
Due date of filing Equalisation Levy Statement before 30th June of Financial Year.
Consequences of Delayed Payments
In case there is a delay in payment interest will be charged at 1% of the outstanding levy for every month or part thereof.
In case there is non-compliance on behalf of the service recipient the compliance procedure for the Equalisation Levy is the responsibility of the service recipient.
Penalty for failure of payment
- Equalisation Levy not deducted: Penalty equal to the amount of levy failed to be deducted along with interest and depositing of the principal levy outstanding.
- Equalisation Levy deducted but not deposited: Penalty equal to INR 1,000/day subject to the maximum of the levy failed to be deducted along with interest and depositing of the principal levy outstanding.
- Disallowance of such expenditure in the hands of the payer unless the defect is rectified.
Penalty for failure of filing statement of compliance
- INR 100/day for each day the non-compliance continues.
Prosecution
- If a false statement has been filed then the person may be subjected to imprisonment of a term up to 3 years and a fine.
