EQUALISATION LEVY: DIGITAL ADS IN INDIA

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EQUALISATION LEVY: DIGITAL ADS IN INDIA

 

The digital economy in India is growing at a rapid pace. Online advertising forms an integral part of the expeditious growth of the digital economy. The biggest beneficiaries of this rapid growth in this digital Space are companies earning through Digital Ads like Twitter, Yahoo, Google, Linkedin, Facebook and other advertising media.

 

Majorly, these companies are located outside India and therefore not subjected to any taxes in India. People carrying on business in the digital domain could be located anywhere in the world.

 

Equalisation levy is charged @ 6% of the amount/consideration payable to the Non-resident for providing specified services by-

  • A resident in India carrying on any business or profession
  • A non-resident having permanent establishment in India.

 

Specified services means-

  • Online advertisement
  • Any provision for digital advertising space
  • Service for the purpose of advertisement
  • Any other service as notified by the Central Government.

 

Applicability of Equalization Levy-

Equalisation Levy would be applicable only if the aggregate consideration for specified services during the year exceeds Rs.1 Lakhs.

 

Manner of deduction-

Equalisation Levy is deducted in the same manner as TDS. The person making payment towards specified services will be liable to deduct Equalisation Levy 6% of the total consideration and deposit the same to the Central Government.

The amount paid for such specified services is allowable as expense for Income Tax. But, in case of non compliance with the provisions of Equalisation, will not be allowable as expense, it will be allowed in the year in which it is paid.

 

Equalisation Levy NOT charged in the following cases–

  • Non-resident providing the specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment
  • The payment for the specified service by the person resident in India, or the permanent establishment in India is not for the purpose of carrying out business or profession.
  • Where the aggregate amount of consideration in a year does not exceed Rs. 1 Lakhs

 

Other points–

  1. Payment of equalization levy– As per these provisions, 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 with in a period of 7 days  from the end of the month, in which such levy was so deducted.

 

  1. Furnishing of Equalisation statement– Due date of furnishing of Equalisation Levy Statement is 30th June, hence the statement is required to be filed on or before 30th June from the end of relevant financial year. The statement is an annual statement and shall be filed in Form-1.

 

  1. Rectification od mistake– The Assessing officer is empowered to amend any intimation, to rectify any mistake apparent from record, either on suo moto basis or any mistake brought to his notice by the Assessee, within a period of 1 year from the end of financial year in which such intimation, which is sought to be amended, was issued. The assessing officer shall give notice the Assessee of his intimation and also give an opportunity of being heard.

 

  1. Interest on delayed payment– Every Assessee, who fails to pay the amount of Equalisation levy or any part thereof, to the credit of central government, within a period of 7 days from the end of the month, in which so levy was deducted, then shall be liable to pay simple interest @1% of such levy for every month or part thereof till it is deposited with the Central Government.

 

  1. Penalty for failure to deduct of pay Equalisation Levy-

 

a.

Failure to deduct the Equalisation levy

Penalty of amount equivalent to the Equalisation levy.

b.

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

c.

Penalty for failure to furnish statement of Equalisation Levy

 

 Every Assessee who fails to furnish the Equalisation levy statement till 30th June every year shall be liable to a penalty of Rs. 100/- per day during which such failure continues.

 

  1. Furnishing false Equalisation Levy statement- Assessee Furnishes any false statement, delivers

                                                                                   any false statement or account, which he  knows or believes to be false, Imprisonment for a term, which may extend to 3 years and with fine.

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