All you need to know about Equalisation Levy in Income Tax Act

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All you need to know about Equalisation Levy in Income Tax Act

Equalisation Levy was introduced in India in the year, 2016 (vide notification no. 37/2016: F.NO. 370142/12/2016-TPL) with an intent 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”.

Let’s have a look on the provisions deals with the equalisation levy:

Following are the sections, which deals with the provisions related to Equalisation Levy:

S.No.SectionDescription
1165Charge of Equalisation Levy
2166Collection and recovery of Equalisation levy
3167Furnishing of statement
4168Processing of statement
5169Rectification of mistake
6170Interest on delayed payment of equalisation levy
7171Penalty for failure to deduct or pay equalisation levy
8172Penalty for failure to furnish statement
9173Penalty not to be imposed on certain cases
10174Appeal to Commissioner of Income – tax(Appeals)
11175Appeal to Appellate Tribunal
12176Punishment for false statement
13177Institution of Persecution

1) Charge of Equalisation Levy (Sec – 165)

Sec – 165 deals with the provisions related to the 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 –

i. A person resident in India carrying on any business or profession; or

ii. A non-resident having permanent establishment in India.

Specified Service” means online advertisement, 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 purpose); or

• The aggregate amount of consideration payable for the specified service received or receivable does not exceeds Rs. 1 Lakh.

2) Collection and recovery of Equalisation levy (Sec – 166)

Sec- 166 deals with the provisions related to the collection and recovery of equalisation 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.

For example: – For the month June 2018, the amount of equalisation levy shall be credited to the central government, by 7th of July, 2018.

3) Furnishing of statement (Sec -167)

Sec- 167 deals with the provisions related to the furnishing of equalisation levy 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.

For example: – Mr. A make the payment of consideration for specified service in the month of December, then he shall have to deposit the tax by 7th of January, 2018 and file the annual statement in Form -1 on or before 30th June, 2018.

4) Processing of statement (Sec- 168)

Sec -168 deals with the provisions related to the processing of statement filed u/s 167 by the assessee. Where any statement filed by the assessee u/s 167, the same shall be processed to-

– Check the accuracy of statement, to avoid any arithmetical errors; or

– Determine the amount of interest, if any payable on the basis of sum deductible as computed in the statement; or

– Determine the amount payable, or refund due to the assessee, if any

An Intimation shall be generated and send to the assessee specifying the amount payable or refund due to, the assessee. However, no intimation shall be send after the expiry of 1 year form the end of financial year in which such statement is filed.

5) Rectification of mistake (Sec- 169)

Sec-169 deals with the provisions related to the rectification of any mistake apparent from the records. 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.

Before any amendment, the assessing officer shall give a notice to the assessee of his intention, and shall also give the assessee a reasonable opportunity of being heard.

6) Interest on delayed payment of equalisation levy (Sec – 170)

Sec -170 deals with the provisions related to the 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, within such a period as may be specified u/s 166, then he shall be liable to pay simple interest @ 1% of such levy for every month or part of month, by which such credit to the central government is delayed.

7) Penalty for failure to deduct or pay equalisation levy (Sec – 171)

Sec- 171 deals with the provisions related to the penalty for failure to deduct or pay equalisation levy which are as follows:-

Liability ofFailurePenalty
AssesseeFailure to deduct the equalisation levyIn addition, to paying the amount of equalisation levy or interest,

Penalty of amount equivalent to the equalisation levy.

Failure to pay the deducted amount of equalisation levyIn addition, to paying the amount of equalisation levy or interest,

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

8) Penalty for failure to furnish statement (Sec – 172)

Sec-172 deals with the provisions related to the penalty for failure to furnish the equalisation levy statement. Every assessee who fails to furnish the equalisation levy statement, within the time period as specified u/s 167, shall be liable to a penalty of Rs. 100/- per day during which such failure continues.

9) Penalty not to be imposed on certain cases (Sec -173)

Sec -173 deals with the provision related to certain cases, in which penalty should not be imposed. Penalty u/s 171/172 shall not be levied, if the assessee proves to the satisfaction of the assessing officer that there was a reasonable or sufficient cause for such failures.

10) Appeal to Commissioner of Income – tax (Appeals) (Sec -174)

Sec-174 deals with the provisions related to an appeal to Commissioner of Income – Tax (Appeals). Every assessee, who is aggrieved by an order imposing penalty by assessing officer, may prefer an appeal to CIT (A) within a period of 30days from the date of receipt of order.

Appeal to CIT (A) shall be made in such a form as specified and accompanied with fees of Rs. 1000. (Other provisions of sec- 249 to 251 of IT Act shall be applicable).

11) Appeal to Appellate Tribunal (Sec – 175)

Sec-175 deals with the provisions related to an appeal to appellate tribunal. Every assessee, who is aggrieved by an order of CIT (A), may prefer an appeal to appellate tribunal, within a period of 60days from the date on which the order sought to be appealed against, received by the assessee.
Appeal to appellate tribunal shall be made in such a form as specified and accompanied with fees of Rs. 1000. (Other provisions of sec- 253 to 255 of IT Act shall be applicable).

12) Punishment for false statement (Sec – 176)

Sec- 176 deals with the provisions related to the punishment for false statement.

Liability ofFurnishing of informationPunishment
AssesseeFurnishes 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

13) Institution of Persecution (Sec – 177)

Sec-177 deals with the provision related to the institution of prosecution which provides that no prosecution shall be instituted against the assessee for offence u/s 176, except with the prior approval of Chief Commissioner of Income Tax.

Notes: – 1) Acc. To the provisions of sec – 40(a)(ib) of 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.

Links:

https://www.incometaxindia.gov.in/Communications/Notification/Notification372016.pdf

https://www.incometaxindia.gov.in/Communications/Notification/Notification382016.pdf

Disclaimer: The contents of this article have been prepared in accordance with the relevant provisions, and information available at the time of preparation. The views and opinions expressed in this article are those of the author and the author does not take any responsibility and cannot guarantee that no inaccuracy occurs. This article cannot be quoted without the consent of the author. 

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