The Central Board of Direct Taxes (CBDT) on Monday released the Committee of Taxation of E-commerce report, batting for the equalisation levy at a rate between 6% and 8% of the gross payment made for specified services.
The report titled The Proposal for Equalisation Levy on Specified Transaction provides clarity on the issue and “puts to rest” the long drawn debate on it.
The eight-member committee, comprising senior officials from the finance ministry and Income-Tax (I-T) department, industry representatives, ICAI representative and independent professionals suggests to restrict the rate of equalisation levy at 6% at the time of its introduction, and evaluate a rate hike in later years.
Its 124-page report recommends levy on specified digital services and facilities including online marketing and advertisements, cloud computing, website designing hosting and maintenance, digital space, digital platforms for sale of goods and services and online use or download of software and applications.
Interestingly, to limits its impact, the committee notes the only payments exceeding Rs 1 lakh made “by a person resident in India or a permanent establishment of a non-resident person to a non-resident enterprise” be covered under the levy.
“Such a threshold (Rs 1 lakh),” says the report, “will keep almost all B2C (business-to-consumer) transactions, as well as a very large number of B2B (business-to-business) transactions outside the scope of the equalisation levy, thereby limiting its impact,” observes the e-commerce taxation panel.
In its report, the committee says that it had considered two other options – a new nexus-based on significant economic presence and the withholding tax on digital transactions – but found the equalisation levy as most suited for India.