Equalisation Levy on E-Commerce: A Comprehensive Guide

The Equalisation Levy was initially introduced through the Finance Act 2016, targeting specific non-resident businesses engaged in digital commerce. With the advent of the Finance Act 2020, this levy has evolved, broadening its reach to include more e-commerce players. This article provides an in-depth analysis of the Equalisation Levy imposed on e-commerce operators, as expanded in the Finance Act 2020.

Key Terms and Definitions in Equalisation Levy

Understanding the Equalisation Levy requires a clear grasp of the definitions of 'e-commerce operator' and 'e-commerce supply/services'. Let's delve into these crucial terms:

E-commerce Operator: According to Section 164(ca) of the Act, an e-commerce operator refers to a non-resident who owns, operates, or manages digital/electronic platforms for the online sale of goods, the provision of services, or both.

E-commerce Supply/Services: As defined in Section 164(cb) of the Act, e-commerce supply/services encompass:

Online sale of goods owned by the e-commerce operator.
Online provision of services rendered by the e-commerce operator.
Facilitating the online sale of goods or provision of services by the operator.
A combination of any of the above activities.

Regulations Governing Equalisation Levy on E-commerce

The provisions outlined in the newly introduced Section 165A define the scope of the Equalisation Levy as applied to e-commerce transactions. Here is a summary of the key elements covered under Section 165A:

Applicability of Equalisation Levy on E-commerce	Consideration from an e-commerce operator regarding e-commerce supply/services should be aimed at: Individuals residing in India. Non-residents, under specific conditions such as advertisement sales targeting Indian residents or data sales from which information is sourced in India. Customers purchasing e-commerce goods/services using an Indian internet protocol address.
Rate of Equalisation Levy	2%
Transactions Exempt from Equalisation Levy	The levy is not applicable in scenarios where: Section 165 Equalisation Levy applies. The e-commerce operator has a permanent establishment in India, effectively connecting the supply/service with it. The annual sales, turnover, or gross receipt from the e-commerce supply/service are below INR 2 Crore.

These provisions took effect as of 1st April 2020. For further understanding, you might want to explore the detailed GST rates for services related to e-commerce.

Compliance Requirements

If Section 165A applies, the non-resident e-commerce operator is liable to pay the Equalisation Levy. Below is the timeline for the payment schedule:

Quarter	Payment due date
April to June	7th July
July to September	7th October
October to December	7th January
January to March	31st March

Additionally, the operator must submit an annual statement by 30th June of the following financial year. Compliance with the levy process can be explored further through resources like the GSTR-10 process guide which can prove beneficial in understanding tax compliance methodologies.

For expanding your knowledge on different financial regulations, you may also check out government schemes for business, or if you’re interested in business registration, consider looking at the partnership registration process.

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Frequently Asked Questions

Common questions about Equalisation Levy on E Commerce.

An e-commerce operator is a non-resident entity that owns, operates, or manages a digital or electronic facility or platform for the online sale of goods, online provision of services, or both, as defined in Section 164(ca) of the Income Tax Act.

As per Section 164(cb) of the Income Tax Act, e-commerce supply or service refers to the online sale of goods owned by the e-commerce operator, online provision of services by the e-commerce operator, online sale or provision of goods or services facilitated by the e-commerce operator, or a combination of these activities.

The Equalisation Levy on e-commerce transactions is imposed at a rate of 2% on the consideration received or receivable by the e-commerce operator.

The Equalisation Levy on e-commerce transactions is applicable on the consideration received or receivable by an e-commerce operator from e-commerce supply or services provided or facilitated to a person resident in India, a non-resident in specified circumstances, or a person using an internet protocol address located in India.

The specified circumstances for non-residents under the Equalisation Levy provisions include the sale of advertisements targeting customers resident in India or accessing the advertisement through an Indian IP address, and the sale of data collected from persons resident in India or using an Indian IP address.

Yes, the Equalisation Levy on e-commerce transactions is not applicable in cases where the Equalisation Levy under Section 165 is already applicable, where the e-commerce operator has a permanent establishment in India and the transaction is effectively connected to it, or where the e-commerce operator's turnover from such transactions is less than INR 2 crore in a year.

The due date for payment of the Equalisation Levy on e-commerce transactions is the 7th of the month following the end of each quarter (April-June, July-September, October-December) and 31st March for the January-March quarter.

Yes, e-commerce operators are required to furnish an annual statement on or before 30th June of the succeeding financial year, providing details of the transactions subject to the Equalisation Levy.

The provisions related to the Equalisation Levy on e-commerce transactions, as introduced by the Finance Act 2020, are effective from 1st April 2020.

No, the Equalisation Levy on e-commerce transactions applies only to non-resident e-commerce operators. Indian e-commerce operators are subject to regular income tax provisions and not the Equalisation Levy.