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A Detailed Analysis of Equalisation Levy


What is Equalisation Levy (EL)?

Equalisation levy is a direct tax which is withheld at the time of payment by the service recipient.

Applicability of Equalisation Levy

Equalisation Levy is a direct tax, which is withheld at the time of payment by the service recipient. The two conditions to be met to be liable to equalisation levy:

  • The payment should be made to a non-resident service provider;
  • The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.


Services Covered Under Equalisation Levy

Currently, not all services are covered under the ambit of equalisation Levy. The following services covered:

  • Online advertisement
  • Any provision for digital advertising space or facilities/ service for the purpose of online advertisement

As and when any other services are notified will be included with the aforesaid services.


Consequences of failure to deduct Equalisation Levy

Whole amount i.e Rs 300000 will not be allowed as a deductible expenditure.

In addition, payer is liable for following penalties- Rs 1000 per day during which failure continues maximum of amount of equalisation levy.

Time of deposit – 7th day of month following the month in which the equalisation levy is deducted. Annual due date of furnishing the annual statement –

Form No 1 need to be submitted on or before 30th June of F.Y ended

When Equalisation Levy not applicable-

The E-commerce operator has a permanent establishment in India and such e-commerce supply is conducted with such PE. Sales, Turnover, gross receipts from e-commerce supply or services is less than Rs 2 crore during the previous year.

Rate of Tax Under Equalisation Levy

Currently, the applicable rate of tax is 6% of the gross consideration to be paid.

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