CBDT vide notification no. 37/2016 has made EQUALIZATION LEVY applicable w.e.f. 1st June 2016.
Rules relating to same are notified vide notification no. 38/2016 The specified services covered by the levy include online advertising, provision for digital advertising space and any other service to be notified by government. The rules come into effect from June 1.
The idea is to indirectly tax internet giants for money they make from Indian advertisers, by imposing a levy on the payments these advertisers make.
Short FAQ on Equilization Levy:-
1. What is Equilisation Levy ?
From June 1, an equalisation levy of 6% will have to be deducted by a business entity in India which makes payments exceeding Rs 1 lakh in the aggregate in a financial year to a non-resident service provider for specified services.
2. What are the services that fall under this rule?
For now, specified services cover online advertisements, provision for digital advertising space or any other facility or service for thepurpose of online advertisements. This list will expand soon.
3. Why this tax?
The move is aimed at technology firms that gain on online ads. This will bring them under India's tax net. A similar tax structure is already in place Organisation for Economic Cooperation and Development (OECD) nations and European countries.
4. How does it impact me?
The move impacts anyone and everyone with an online setup and who use Facebook or Google for marketing.
5. What if a firm fails to deduct this tax?
Then the firm or the business owner won't be allowed to consider the expenses in calculating taxable profits, which will increase their taxable income and liability.
Regards
CA Yogesh Harjai
CAclubindia
