India Amends Tax Form To Include Non-Resident E-Commerce Firms For Equalisation Levy

India has made changes to the form for paying the equalisation levy by expanding its scope to include non-resident e-commerce companies supplying goods and services online.

The Asia's third-largest economy has initiated the move despite being under investigation by the U.S. trade watchdog for possibly being discriminatory towards companies based in America.

The 2% tax would be levied on non-resident e-commerce players supplying goods or services online with a turnover or sales of over Rs 2 crore in the previous year.

Over two dozen non-resident tech companies would come under the purview of the equalisation levy which was introduced in Budget 2020-21 and has come into effect from April 1, 2020. The first instalment is due on July 7.

The income tax department has modified challan ITNS 285 (relating to payment of equalisation levy) to enable payment of the first installment by non-resident e-commerce operators.

The amended challan now adds "e-commerce operator for e-commerce supply or services" under 'Type of Deductor'.

Nangia Andersen LLP Partner Sandeep Jhunjhunwala said along with this modification in the payment challan, the Central Board of Direct Taxes has also cleared the clouds on requirement of PAN by making it a mandatory tab in the challan.

“This has imposed a burdensome and challenging task for non-resident e‑commerce players to apply for and obtain Permanent Account Number within one business day at a time when they have been impacted by the Coronavirus pandemic,” Jhunjhunwala said.

Moreover, he said such companies will also have to organise the mode of payment of tax through an Indian bank account or a debit card issued by an Indian bank.

"This rushed move could cause substantial challenges in discharging the nearing first payment liability of equalisation levy, in case interest and penalty for delayed payments are to be avoided," Jhunjhunwala said.

Neeru Ahuja, a partner at Deloitte India said the tax liability for the first quarter would be negligible due to the lockdown imposed to prevent Covid-19 pandemic and is expected to only pickup in coming months.

“We would need clarifications as the law is ambiguously worded,” Ahuja said adding “It mentions that if a company pays income tax, it will not be required to pay the equalisation levy from April 2021, but does not mention the arrangement in the meantime.”