Digital Taxation : Equalisation Levy Extended to E- Commerce Activities

Sunil Arora, Co-Practice Head, Mumbai and Partner Taxation, wrote about issues surrounding new 2% digitalisation Tax levy for E- Commerce Companies.

The Lockdown brought around a new way of life. The digital world took the first step whether it was e-commerce transactions, streaming services or e-learning portals. Keeping this in mind, digital is the new normal so the tax structure around it needs to be too. Taxing a digital business has a number of challenges. In order to address this an Equalisation Levy (EQL) was introduced at 6% in respect to non-resident businesses that engage in online/digital advertisement services and related activities. On March 27, 2020 the scope of this EQL had been extended to a larger set of digital activities while the existing 6% still remained.

This article outlines what has changed since then such as the changes introduced on April 1, 2020 for e-commerce supply and services. Further discussed is what constitutes e-commerce supplies or services with regards to the sale of online goods and services. There are a few exceptions to the 2% EQL introduced in April 2020 as well as key issues to ponder as this extended levy opens up a new dimension for subjecting e-commerce operators to tax in india.

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