Equalization levy

Applicability:-

Equalisation Levy is a direct tax, which is withheld at the time of payment by the service recipient. The two conditions to be met to be liable to equalisation levy:

• The payment should be made to a non-resident service provider;
• The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.

Services Covered Under Equalisation Levy:-

Currently, not all services are covered under the ambit of equalisation Levy. The following services covered:

• Online advertisement;
• Any provision for digital advertising space or facilities/ service for the purpose of online advertisement;

Rate of Tax:-

Currently the applicable rate of tax is 6% of the gross consideration to be paid.

What If a Company Fails To Deduct This Tax? :-

The Budget has proposed that any Indian business owner or company that fails to deduct this tax or equalization levy or doesn’t deposit it with the government, then the company will not be allowed to consider the expenses in calculating taxable profits. This will increase the taxable income, thereby hiking the company’s tax liability.

The Impact Of Equalization Levy On The Industry :-

The services at which this tax, also gaining popularity and dubbed as Google Tax, is levied include online advertising or providing digital advertising space with the primary aim of levying tax on the income generated by internet  giants from Indian advertisers. The equalization levy is imposed on the payment of the advertisers and has introduced India e-commerce industry to a new kind of tax.

It will affect the business of e- commerce giants which do not have permanent establishments in India. Internet giants like Facebook and online start – ups which receive payments from Indian advertisers will also be largely affected. The tax has come into effect from 1st June 2016 along with Equalization levy rules, 2016 notified by Central Board of Direct taxes