In line with the global tax deal pursuant to the pillar one solution developed at the OECD (Organisation for Economic Cooperation and Development) G20 inclusive framework, it is proposed in the Union Budget 2024-2025 to withdraw the ‘equalisation levy’ imposed at 2% on e-commerce operators with effect from 1st August 2024.
India introduced a form of direct tax called the Equalisation Levy in the Finance Act of 2016. It is applied to considerations received or receivable for any specified service on any non-resident person including e-commerce operators.
An ‘e-commerce operator’ is defined as a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provisions of services or both. Also ‘e-commerce supply or services’ was defined as (i) online sale of goods owned by e-commerce operator; (ii) online provision of services provided by e-commerce operator; (iii) online sale of goods or provisions of services or both facilitated by e-commerce operator; (iv) any combination of activities listed in clause (i), (ii) or clause (iii).
Amazon, Netflix, Google, and other non-resident digital companies will be relieved over the abolishing of equalisation levy imposed on profits. The proposal is expected will also boost the e-commerce business through digital platforms. This is seen as a special focus on ‘Ease of Doing Business’ in India.
The said proposal has not altered the equalisation levy at the rate of 6% on the consideration for any specified service received or receivable by a non-resident from (i) a person in India and carrying on business or profession; (ii) a non-resident having a permanent establishment in India will still be applicable. In this case the ‘specified service’ is defined as online advertisement, any provision for digital advertising space or any other facility for the purpose of online advertisement, and includes any other service as may be notified by the Central Government.
