The Central Government has introduced Equalisation Levy (EL) popularly known as Google Tax on the Online or Digital Advertising defined as Specified Services under sub section (i) of Section 164 of the Finance Act, 2016. We are noting below Frequently Asked Questions in respect of the Equalisation Levy (EL):-
FAQ 1 : What is Equalisation Levy (Google Tax)?
Ans 1 : As per Section 164 (d) of the Finance Act, 2016 – “equalisation levy” means the tax leviable on consideration received or receivable for any specified service under the provisions of the Chapter VIII of the Finance Act, 2016;
FAQ 2 : What is the Date from which Equalisation Levy (Google Tax) has been made applicable?
Ans 2 : 01-06-2016
FAQ 3 : Who is liable to pay Equalisation Levy (Google Tax)?
Ans 3 : As per sub section 1 of section 165 of the Finance Act, 2016, Equalisation Levy (Google Tax) shall be payable by following on the amount of consideration for any specified services received or receivable by a person, being a Non Resident (Service Provider) from:-
a) a person resident in India and carrying on business or profession (Service Recipent); or
b) a non-resident having a permanent establishment in India (Service Recipient).
FAQ 4 : What are the EXEMPTIONS given from payment of Equalisation Levy liability mentioned in FAQ 3 above?
Ans 4 : Equalisation Levy under sub section 1 of Section 165 of the Finance Act, 2016 shall not be charged in following cases:-
(a) the non-resident providing the specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment;
(b) the aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed one lakh rupees; or
(c) where the payment for the specified service by the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession.
FAQ 5 : What are the ‘Specified Services’ on which Equalisation Levy (Google Tax) is applicable?
Ans 5 : Specified Services have been defined u/s 164 (a) of the Finance Act, 2016 as below:-
(i) “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 in this behalf;
FAQ 6 : What is the Rate of Equalisation Levy (Google Tax)?
Ans 6 : 6% of the amount paid or payable to a Non Resident for Specified Services.
Example 1 : Where the Non Resident recipient accepts payment after deduction of EL:-
a) Value of Online Digital Advertising (Specified Services) – Rs. 1000/-
b) Equalisation Levy Amount – Rs. 60.00 ( Formula : 1000 * 6 /100)
Example 2 : Where the Non Resident recipient does not allow the deduction of EL from his Fees/ Charges:-
a) Value of Online Digital Advertising (Specified Services) – Rs. 1000/-
b) Equalisation Levy Amount – Rs. 63.80 ( Formula : 1000 * 6 /94)
FAQ 7 : Whether the Exemption Limit of Rs. 1 Lakhs specified u/s 165 (2) (b) is applicable for each Non Resident recipient or is consolidated Limit for all Non Resident Recipient?
Ans 7 : As per our understanding from the reading of Section 165 (2) (b) and Section 166 (1) – The Exemption Limit of Rs. 1 Lakh is a consolidated limit for payments to all the Non Resident in a Previous Year for Specified Services. [Note – Our opinion in this matter may not be acceptable to the adjudicating authority/ Courts and is subject to further discussion].
FAQ 8 : What is the time limit for Payment of Equalisation Levy (Google Tax) to the credit of Central Government?
Ans 8 : As per Section 166 (2) of the Finance Act, 2016, The Equalisation Levy deducted in a month shall be paid to the credit of Central Government on or before the seventh day of subsequent month.
FAQ 9 : What is the procedure for payment of Equalisation Levy (Google Tax)?
Ans 9 : The Equalisation Levy (Google Tax) shall be paid vide Challan No. ITNS 285 : Link – http://www.incometaxindia.gov.in/forms/itns285.pdf
FAQ 10 : Is there any Statement to be filled in respect of the Specified Services by the Assessee?
Ans 10 : Yes, an Annual Statement in respect of all the specified services chargeable to Equalisation Levy during any Financial Year shall be furnished in the Form 1, notified under Equalisation Levy Rules, 2016 dated 27-05-2016 shall be filled by an assessee on or before 30th June immediately following that Financial Year.
FAQ 11 : What is the Interest and Penalty for delay or Non-Compliance of the Equalisation Levy (Google Tax)?
Ans 11 : INTEREST for delay in payment of Equalisation Levy (Google Tax) shall be paid @ 1% for the month or part of month for the period of Delay.
PENALTIES are prescribed as below:-
Section 171 of the Finance Act, 2016:-
Any assessee who–
(a) fails to deduct the whole or any part of the equalisation levy as required under section 166; or
(b) having deducted the equalisation levy, fails to pay such levy to the credit of the Central Government in accordance with the provisions of sub-section (2) of that section, shall be liable to pay,—
(i) in the case referred to in clause (a), in addition to paying the levy in accordance with the provisions of sub-section (3) of that section, or interest, if any, in accordance with the provisions of section 170, a penalty equal to the amount of equalisation levy that he failed to deduct; and
(ii) in the case referred to in clause (b), in addition to paying the levy in accordance with the provisions of sub-section (2) of that section and interest in accordance with the provisions of section 170, a penalty of one thousand rupees for every day during which the failure continues, so, however, that the penalty under this clause shall not exceed the amount of equalisation levy that he failed to pay.
Section 172 of the Finance Act, 2016:-
“Where an assessee fails to furnish the statement within the time prescribed under sub-section (1) or sub-section (3) of section 167, he shall be liable to pay a penalty of one hundred rupees for each day during which the failure continues.”