[Jan] Equalization levy (Digital services tax) AKA google tax

Question 1

What is it? How is it different from Income tax act,1961?

Answer 1

• Company ‘A’ -> registered in US ->it’s subsidiary B registered in India -> providing digital services (Advrtisements/e-commerce platforms)Equalization levy not applicable on B -> Pay normal income tax under IT act 1961
• If B is not registered in India,has no physical presence -> still selling digital services in India -> equalization levy will be applicable on B but no Income tax

Question 2

Law support?

Answer 2

Under Finance Act 2016

From 1st april 2020-> equalization levy of 2% is applicable on e-commerce firms i.e. amazon also

Question 3

On what values is it levied?

Answer 3

It’s a direct tax & is levied on ‘Revenue’ & not ‘profit’

Question 4

on which services is the tax imposed?

Answer 4

digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service etc.

Question 5

Update (12 feb)

Answer 5

The United States Trade Representative (USTR’s) Section 301 has called out India’s digital taxation regime, claiming it is not in sync with international tax principles.