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Guide to Equalisation Levy: Features, Applicability, Penalty

Equalisation Levy

A new chapter viii titled ‘Equalisation levy’ is inserted in the finance bill which will take effect from the 1st of June 2016 to provide for an equalization levy of 6 % of the amount of consideration for specified services received or receivable by a non-resident not having a permanent establishment (‘PE’) in India, from a resident in India who carries out business or profession, or from a non-resident having a permanent establishment in India.

With the introduction of the equalization levy, the Govt. has been indirectly able to tax global advertising companies and has set more services that may be added to the list of specified services in the future.

Latest Update

Important Knowledge About India-US Pact on Equalization Levy

India’s Ministry of Finance provided a statement in which the terms of the October joint statement would indeed apply to India’s 2% equalization levy applicable on e-commerce supply or services and USTR’s trade action with respect to the equalization levy. As per the statement, the final terms of the agreement would be finalized dated 1st Feb 2022.

Equalization Levy Withdrawal

India needs to withdraw its 2% equalization levy which is subject to be applied to e-commerce supply or services until the OECD pillar one provision begins in the country predicted to be in 2013.

The Furnishing of Credit Excess Equalization of Levy

Surplus paid by the multinational companies determined by pillar one would be available as credit for set-off concerning their corporate tax liability which is beneath pillar one.

Credit Availability in a Year

The credit of surplus equalization levy furnished would be subjected to apply in the 1st taxable year where the assessee would be liable for the tax liability post to the interim duration.

Towards the concern of the Pillar, one would not be subjected to apply on the assessee in the execution year on the grounds of the first year the credits have been revealed where pillar one is applicable for these assessees and would become available at these times.

However, the credit would not be available for the assessee who first applied to pillar one exceeding 4 years post pillar one would be applicable in India.

Credit Carry Forward

The credit that is revealed would be laid forward for set off opposite to pillar one corporate tax liability unless it gets exhausted.

USTR Execution Under Equalization Levy

The US would eliminate USTR action in India for the levied trade tariffs coordination towards the 2% equalization levy till the finish of the interim/transitional period.

Currently, this Equalisation Levy is Witnessed only on Advertisement.

Equalisation Levy: 6% on Amount of Consideration

The Salient Features of this Equalisation Levy are as Under

Equalisation Levy will not be Charged

Applicability and Manner of Deduction of Equalisation Levy

Reason for Introduction of Equalisation Levy

Due Date of Depositing Equalisation Levy

Due Date of depositing Equalisation levy to the account of Central Govt by the 7th day of the Month immediately following the said calendar month.

Due Date of Furnishing Equalisation Levy Statement (Form-1)

The due date of the Furnishing Equalisation levy Statement is on or before 30th September of the Financial Year end. (after the end of the Financial Year assessee has to submit Form-1 on or before 31st July or within the prescribed time as the case may be.)

Note: “The Equalization Levy Statement in Form No.1 for the Financial Year 2023-24, which was required to be filed on or before 30th June 2024”

Revision or Late Submission of Form-1

If the assessee failed to furnish the statement within time or had furnished it wrong and now wants to revise the same he can upload a belated return or revise the TDS return at any time before the expiry of two years from the end of the financial year in which specified services were provided.

Interest on Default: If the amount of levy is not deposited within a specified time then the assessee shall have to pay 1% Interest on such levy for every month or part of the month by which such credit of the Tax or any part of Tax is delayed.

Penalty for Failure to Deduct or Pay Equalisation Levy

Penalty for Default in Furnishing Statement

If the assessee fails to furnish the Equalisation levy statement within the prescribed time, he has to pay a penalty of 100 Rs. Per day till the default continues.

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