CBDT vide Notification No. 87/2020 dated 28.10.2020 has amended the provisions of Equalisation Levy Rules, 2016 notified on 27.05.2016 vide Notification No. 38/2016. These rules are called the Equalisation levy (Amendment) Rules, 2020. Equalisation levy is also called as 'Google tax' since online advertisement through google has the largest share and this levy impacts google most.
Equalisation Levy Rules lay down the procedural framework for implementation, including prescribing forms for filing of annual return and appeals.
Equalisation Levy was first introduced in India by Finance Act 2016 as a separate Chapter VIII titled ‘Equalisation Levy’ to provide for an equalisation levy of 6% to be deducted from amounts paid to a non-resident not having any permanent establishment in India, for specified services. Thereafter, CBDT vide a notification dated 27.05.2016 stated that the provisions of Chapter VIII relating to the equalisation levy would come into effect from 1st June 2016. The CBDT also notified the Equalisation Levy Rules, 2016 effective from 1st June 2016.
“Specified service” means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government. No other services so far notified.
Equalisation Levy was not made a part of the Income Tax Act, 1961. Hence, equalisation levy is not income-tax and this levy does not come under income tax. Although, equalisation levy is administered by the income-tax authority.
The Finance Act 2020 has extended and enlarged the scope of equalisation levy to almost all digital e-commerce transactions in India which will come into effect from April 1, 2020.
For this purpose, Chapter VIII of the Finance Act, 2016 has been amended to include non-resident e-commerce operators within the ambit of equalisation levy.
It should be noted that the provisions of the Equalisation Levy 2020 on non-resident e-commerce operator were not in the Finance Bill, 2020 when the same was introduced in the Parliament on February 1, 2020. The same was introduced in the Finance Bill, 2020 at the time of passing by the Lok Sabha on 23.03.2020. The Bill was notified as Finance Act, 2020 on 27.04.2020 and the provisions came into force from April 1, 2020. This is the period when the entire nation, as well as most of the countries of the world, were under lockdown due to COVID-19 pandemic.
Now, the government has amended the Equalisation Levy Rules, 2016 as Equalisation levy (Amendment) Rules, 2020 to incorporate the amended provisions of equalisation levy on non-resident e-commerce operators. The Board has also amended forms for filing annual statements and appeal before CIT (Appeals) and ITAT.
The following amendments have been made in the Equalisation Levy Rules, 2016:
(1) Definition of “electronic verification code” is added to definition Rules 2: A new clause (aa) is added to Rule 2 to define “electronic verification code” in the following words-
“electronic verification code” means a code generated for the purpose of electronic verification of the person furnishing the statement of specified services as per the data structure and standards laid down by the Principal Director- General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be.
Earlier, “electronic verification code” was defined in Rule 5 by way of an Explanation thereto. However, no such definition was given in Rule 8.
(2) Rounding off rules amended: The heading of Rule 3 is amended to exclude the words “for specified services”. The new heading reads as follows-
“Rounding off of consideration, equalisation levy, etc.”
Further the words “for specified services” has also been omitted from the opening sentence of the said rule.
(3) Amendment to payment of equalisation levy: Rule 4 related to payment of equalisation levy is amended to include an e-commerce operator in addition to the assessee.
(4) Filing of annual statements: Rule 5 is amended to include a statement of e-commerce supply or services in addition to the statement of specified services.
Further, provision to furnish a revised statement in Form No. 1 is incorporated.
(5) Furnishing of a statement in response to notice: Rule 6 is amended to include the furnishing of a statement of specified services or e-commerce supply or services in response to a notice issued by the Assessing Officer.
Further, this rule is made applicable to an e-commerce operator apart from the assessee.
(6) Notice of demand: The notice of demand can now be served upon an assessee as well as on an e-commerce operator under Rule 7 by the Assessing Officer.
(7) Amendment related to Appeals: An e-commerce operator is also allowed to file an appeal before the CIT(A) as per Rule 8.
(8) Amendment related to ITAT Appeals: An e-commerce operator is also allowed to file an appeal before the ITAT as per Rule 9.
(9) Substitution of Forms: For the execution of amended provisions of the Rules, Form 1, Form 3 and Form 4 under the Equalisation Levy Rules, 2016 has been substituted with effect from 28.10.2020.
Read the full text of the Notification No. 87/2020 dated 28.10.2020 on Equalisation Levy (Amendment) Rules, 2020
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 28th October, 2020
EQUALISATION LEVY
S.O. 3865(E).—In exercise of the powers conferred by sub-section (1) and sub-section (2) of Section 179 of the Finance Act, 2016 (28 of 2016), the Central Government hereby makes the following rules to amend the Equalisation levy Rules, 2016, namely:-
1. Short title and commencement. ─ (1) These rules may be called the Equalisation levy (Amendment) Rules, 2020.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Equalisation levy Rules, 2016 (hereinafter referred to as the said rules), in rule 2, after clause (a), the following clause shall be inserted, namely:-
‘(aa) “electronic verification code” means a code generated for the purpose of electronic verification of the person furnishing the statement of specified services as per the data structure and standards laid down by the Principal Director- General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be;’.
3. In the said rules, in rule 3,-
(a) in the heading, the words “for specified services” shall be omitted;
(b) for the words “The amount of consideration, for specified services and”, the words, “The amount of consideration” shall be substituted.
4. In the said rules, for rules 4 and 5, the following shall be substituted, namely:-
“4. Payment of Equalisation levy. ─ The assessee or e-commerce operator, as the case may be, who are required to deduct and pay equalisation levy, shall pay the amount of such levy, by remitting it into the Reserve Bank of India or in any branch of the State Bank of India or of any authorised Bank accompanied by an equalisation levy challan.
5. Statement of specified services or e-commerce supply or services. ─ (1) The statement required to be furnished under sub-section (1) or sub-section (2) of section 167 of the Act shall be in Form No. 1, duly verified in the manner indicated therein, and may be furnished by the assessee or e-commerce operator, as the case may be, in the following manner, namely:-
(i) electronically under digital signature; or
(ii) electronically through electronic verification code.
(2) The statement in Form No. 1 required to be furnished under sub-section (1) of section 167 of the Act shall be furnished on or before the 30th day of June immediately following that financial year.
(3) The Principal Director-General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, for the purpose of ensuring secure capture and transmission of data, shall -
(i) lay down the procedure for electronic filing of Form No.1;
(ii) lay down the data structure, standards and manner of generation of electronic verification code, referred to in sub rule (2), for the purpose of verification of the person furnishing the said form;
(iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said form so furnished; and
(iv) specify the manner of furnishing the revised statement required to be furnished under sub-section (2) of section 167 of the Act.”
5. In the said rules, in rule 6,-
(a) in the heading, after the words “specified services” the words “or e-commerce supply or services” shall be inserted;
(b) for the words “Where an assessee fails”, the words, “Where an assessee or e-commerce operator, as the case may be, fails” shall be substituted.
6. In the said rules, in rule 7, in the proviso, for the word “assessee”, the words “assessee or e-commerce operator, as the case may be,” shall be substituted;
7. In the said rules, in rule 8, for sub-rules (2), (3) and (4), the following shall be substituted, namely:-
“(2) The form of appeal referred to in sub-rule (1), shall be verified by the person who is authorised to verify the statement under rule 5, as applicable to the assessee or e-commerce operator, as the case may be.
(3) Any document accompanying Form No. 3 shall be furnished in the same manner in which the Form No. 3 is furnished.
(4) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, for the purpose of ensuring secure capture and transmission of data, shall-
(i) lay down the procedure for electronic filing of Form No.3;
(ii) lay down the data structure, standards and manner of generation of electronic verification code, referred to in sub rule (2), for the purpose of verification of the person furnishing the said form; and
(iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said form so furnished.”.
8. In the said rules, in rule 9, for the word “assessee” at both the places where they occur, the words “assessee or e-commerce operator, as the case may be” shall be substituted.
9. In the said rules in the APPENDIX, -
(a) for Form No. 1, the following Form shall be substituted, namely: -
(b) in Form No. 2,-
(i) at para 6, for the words and figure “rule 8, duly stamped and verified as laid down in that form”, the words and figures “rule 8 of the Equalisation levy Rules, 2016” shall be substituted;
(ii) at para 7, for the words and figure “rule 9, duly stamped and verified as laid down in that form”, the words and figures “rule 9 of the Equalisation levy Rules, 2016” shall be substituted.
(c) for Form No. 3, the following Form shall be substituted, namely: -
(d) for Form No. 4, the following Form shall be substituted, namely: -
 Rules, 2020){kind=link}
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