India digs in heels over two per cent levy on foreign e-commerce firms

These broaden the challan’s scope to include transactions conducted with non-resident e-commerce companies too.

For representational purpose.

NEW DELHI:  India has chosen to dig in her heels as far as the 2 per cent equalisation levy imposed on foreign e-commerce transactions are concerned. On Saturday—just three days before the first installment of the tax was to be paid—the Income Tax department notified changes to the respective tax challans.

These broaden the challan’s scope to include transactions conducted with non-resident e-commerce companies too. The tax was first proposed in the Union Budget for FY2020-21 and came into effect on April 1. The first installment of the tax is to be paid on July 7. 

According to the Finance Bill 2020, this 2 per cent tax is to be levied on all consideration received by foreign e-commerce companies for providing services or supplying goods in India.

The move had attracted criticism from the United States, which is host to a large number of companies affected by the tax. While reports had said over the past two months that this tax may be reconsidered, the challan amendments indicate that the Indian government is now going ahead with it. 

“The modification of the challan is to facilitate this payment. Earlier this challan only allowed payment for the 6 per cent equalization levy applicable on advertising services that was imposed by Finance Act 2016. Detailed FAQ’s and procedural rules are yet to be specified for the new levy,” said Deloitte India Partner Rohinton Sidhwa, adding that there have been several requests from industry stakeholders to defer the new tax. 

“The industry was expecting its deferral considering the lack of clarification on a few issues,” said Shardul Amarchand Mangaldas & Co Partner Amit Singhania. 

The changes notified on Saturday modify challan ITNS 285 (relating to payment of equalisation levy) to add “e-commerce operator for e-commerce supply or services” under the ‘Type of Deductor’ category.

The challan also seeks the mandatory disclosure of PAN of the deductor, which experts say may lead to further confusion and difficulty for marketplace stakeholders.