Equalisation levy popularly known as ‘Google Tax’:-

Over the last decade, Information Technology has changed the way of doing business in India & globally. This has resulted in an increased cross border in & out supply of digital services all over the world. Due to the lack of physical presence as per the nexus rules in existing tax laws & treaties, taxing such payments was a difficult task.

To bring clarity, Government of India introduced Equalisation Levy in India in the year, 2016 {vide notification no. 37/2016: F.NO. 370142/12/2016-TPL} to tax
The Business to Business (B2B),
E–Commerce transactions/Digital transactions.
Provisions of chapter VIII of Finance Act, 2016 deals with the “Equalisation levy”.

Provisions related to equalisation levy

1) Charge of Equalisation Levy

Equalisation levy shall be charged @ 6% of the amount of consideration payable, for any ‘Specified Service’ received or receivable from a non-resident, by –

1. A person resident in India carrying on any business or profession; or
2. A non-resident having permanent establishment in India.

“Specified Service” means

1. Online advertisement,
2. Any provision for digital advertising space or any other facility or service for the
   purpose of online advertisement, or includes any other service as may be notified
   by the central government in this behalf.

Equalisation levy under sub-section (1) shall not be charged in the following cases: –

• The non-resident providing specified service has a permanent establishment in India and the specified service is connected with such permanent establishment;
  or
• The specified service is not for the purpose of carrying out business or profession (i.e. for personal purposes); or
• The aggregate amount of consideration payable for the specified service received or receivable does not exceed Rs. 1 Lakh in one financial year.

2) Payment of Equalisation levy

Every person, who is responsible to deduct the equalisation levy shall pay the amount of equalisation levy so deducted, to the credit of central government within a period of 7 days from the end of the month, in which such levy was so deducted.

3) Filing of Equalisation Levy

Due date of furnishing of equalisation Levy Statement is 30th June, subsequent to the relevant financial year. The statement is an annual statement and shall be filed in Form-1.

4) Interest on delayed payment of equalisation levy

Every assessee, who fails to pay the amount of equalisation levy or any part thereof, to the credit of central government, then he shall be liable to pay simple interest @ 1% of such levy for every month or part of a month, by which such credit to the central government is delayed.

5) Penalty for failure to deduct or pay equalisation levy

1. Failure to deduct the equalisation levy – Penalty shall be an amount equivalent to the equalisation levy, In addition to paying the amount of equalisation levy or interest.
2. Failure to pay the deducted amount of equalisation levy – Penalty of Rs. 1000/- per day, during which such failure continues, subject to a maximum of the amount of equalisation levy, which he failed to pay,In addition to paying the amount of equalisation levy or interest.

6) Penalty for failure to furnish statement of equalisation Levy

Every assessee who fails to furnish the equalisation levy statement, within the given time period, shall be liable to a penalty of Rs. 100/- per day during which such failure continues.

7) Punishment for false statement of equalisation Levy

Penalty for furnishing false statement which he knows or believes to be false shall be Imprisonment for a term which may extend to 3 years and with fine.

Notes:-

1. According to the provisions of sec – 40(a)(ib) of the IT Act – 1961, Any consideration paid or payable to the non-resident, for the specified service, which is subject to equalisation levy, and if such equalisation levy has not been deducted or deducted but not paid on or before the due date of furnishing of return (specified u/s 139), shall not be allowed while computing the income under the head PGBP. Further, such sum shall be allowed in the year in which such sum is paid.
2. Any income arising to the non-resident, by providing the specified service, which is subject to equalisation levy, shall be exempt from tax in the hands of such non-resident.