India Widen Taxation of Cross Border E-Commerce Transactions

As we all know the growing importance of digital economy and e-commerce business and the impact they are creating on us.

1.0 This would cover inside the ambit online membership based administrations, online offer of merchandise/administrations/programming, internet gaming, inn/flight booking and so on, for example, Netflix, Amazon, Flipkart, Uber, Airbnb, MakeMyTrip, and Nintendo. Tax collection from cross outskirt online business exchanges has been a test for the entire world, including India because of area of the provider, nonattendance of physical nearness, describing the idea of exchange (merchandise or administration), authoritative difficulties in following and gathering charges and burdening locale. So as to bring such cross fringe web based business exchanges in to the duty net, India has as of late tremendously extended the inclusion of "Balance Levy" with impact from 1 April 2020. The Finance Act, 2020 which got consent from the President of India on 27 March 2020 has changed the arrangements of Equalization Levy and enlarged its degree to present toll on web based business flexibly or administrations @ 2% encouraged by a non-inhabitant online business administrator.

2.0 Equalization Levy on online ad presented by Finance Act, 2016 Following the guide laid by BEPS Action Plan 1, India had presented "Leveling Levy" in the Finance Act, 2016 which accommodated a toll at 6% on the measure of thought for any predetermined help got or receivable by a non-inhabitant (not having Permanent Establishment - PE in India) from an individual occupant in India and carrying on business or calling or a non-inhabitant having a PE in India, if such thought surpasses Rs 1 lakh during the budgetary year. The said demand is relevant to determined administrations which spread online promotion, any arrangement for computerized publicizing space or some other office or administration with the end goal of online commercial under business-to business (B2B) exchanges and thus had an extremely constrained inclusion. The obligation of deducting and keeping the duty is on the Indian payer who is accepting the administrations.

3.0 Separate system to charge Equalization Levy on E-Commerce Supply or Services presented by Finance Act 2020 The Finance Act, 2020 which got consent from the President of India on 27 March 2020 has corrected the arrangements of Equalization Levy and enlarged its extension to present toll on internet business flexibly or administrations encouraged by a non-inhabitant web based business administrator. The said demand will be appropriate with impact from 1 April 2020 for example from money related year 2020-21.

Determined Rate and Applicability A leveling demand at the pace of 2% will be charged on the measure of thought got or receivable by a non-occupant web based business administrator from internet business flexibly or administrations made or gave or encouraged by it—

• to a person resident in India;

or,

• to a non-resident in the event of
• sale of advertisement, which targets an Indian customer, or a customer accessing the advertisement though Indian internet protocol address; and
• offer of information, gathered from an individual who is occupant in India or from an individual utilizing Indian web convention address; or
• to an individual who purchases such products or administrations or both utilizing Indian web convention address.

E-commerce operator has been defined as a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both. Further, E-commerce supply or services means—

• Online sale of goods owned by the e-commerce operator; or
• Online provision of services provided by the e-commerce operator; or
• Online sale of goods or provision of services or both, facilitated by the e- commerce operator; or
• Any combination of activities listed in clause (i), (ii) or (iii) above.

Help has been given in specific cases and evening out toll @ 2% will not be charged:

• Where the internet business administrator has a Permanent Establishment (PE) in India and such web based business flexibly or administrations is adequately associated with such PE; or
• Where the exchange identifies with online notice and related exercises and has been dependent upon Equalization demand @ 6%; or
• deals, turnover or gross receipts of the web based business administrator from the web based business gracefully or administrations made or gave or encouraged is not as much as Rs. 20 million (for example Rs. 2 crores) during the financial year.

Non-Resident E-commerce Operators required to make compliances in India It is pertinent to note that unlike Equalisation Levy 2016 on online advertisements, the obligation to deposit the Equalisation Levy on e-commerce transactions is on the non-resident e-commerce operator only and not on the payer. The payment of the levy to the government is to be made on a quarterly basis and also an annual statement on Equalisation levy is to be filed by such non-resident e-commerce operators.

Exemption from Income-tax on Transactions Subjected to Equalisation Levy Section 10(50) of the Income Tax Act, 1961 has been amended to provide an exemption from levy of Income tax to any income arising from any e-commerce supply or services on which is equalisation levy is chargeable. Notably, Equalisation levy is not part of Income Tax Act, 1961 hence, recourse to tax treaty may not be available. The foreign companies may not get tax credit / deduction in their home country for the equalization levy paid in India.

Comments:-As one may observe, the definitions of the terms ‘e-commerce operator’ and ‘e-commerce supply or services’ are wide in scope and are likely to cover a wide gamut of digital transactions undertaken by non-resident e-commerce players. Not only, B2B, but also B2C transactions are likely to be covered under the new levy. Also, E-commerce supply or services by a non-resident to another non-resident could also attract equalisation levy in case of sale of advertisement targeted to an Indian customer and sale of data collected from a person who is resident in India. Practical Aspects of Tax Deduction and Collection at Source under Income Tax Act Learn from best faculties in India Free 30 Hr online streaming with pendrive Learn more

There are lot of apprehension amongst the global E-commerce operators regarding the equalisation levy and its practical operations. Issues like meaning of consideration received or receivable, identifying revenue attributable to transactions with Indian customers/ data and applicability of levy on transactions already taxed as royalty / fees for technical services in India, credit for equalization levy under DTAA, etc. need to be further clarified by the Tax authorities.