Equalisation Levy 2.0 : India's unilateral measure to tax digital economy

Scope of Equalisation Levy has been expanded by Finance Act, 2020. Equalisation Levy 2.0 shall be applicable @2% on all e-commerce supplies made by e-commerce operators

BEPS Action Plan 1

Base Erosion Profit Shifting (BEPS) Action Plan 1 recommended to introduce "Equalisation Levy" as a measure for combating double non-taxation or non-taxation at source country which are undertaken through digital means.

Equalisation Levy & India

India has always been an early adopter of measures for combating tax avoidance planning.

Equalisation Levy was introduced in India through Finance Act, 2016, levying a charge at the rate of 6%, on digital advertisements.

Through Finance Act, 2020, the scope has been expanded to all types of e-commerce supplies, made by a non-resident of India, to Indian residents (or to Indian non-residents in specified circumstances), if supply has been made without having Permanent Establishment in India. This levy shall be payable by e-commerce operators @2%, on all types of B2B & B2C e-commerce supplies.

This levy, being a unilateral measure, is considered to be overriding the Double Taxation Avoidance Agreements (DTAA). Expanded scope of levy has far-reaching impact & shall cover all types of supplies within its ambit.

This levy has also brought in many uncertainties & unintended consequences. To access our analysis with respect to this Levy, click here.

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