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Equalisation levy non-discriminatory, says Centre
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SME Times News Bureau | 08 Jan, 2021
The Central government has said that the equalisation
levy is non-discriminatory and seeks to ensure a level-playing field
between e-commerce activities undertaken by entities resident in India,
and those that are not.
The development comes day after the
office of USTR released its findings on the section 301 investigation
into India's digital Services tax (DST) and concluded that India's DST -
the equalisation levy - is discriminatory and restricts US commerce.
Last
year, the US administration had announced initiation of investigation
under section 301 of the US Trade Act, 1974 against the taxation on
digital services adopted or under consideration by countries, including
the 'Equalisation Levy' applied by India.
Other counties under investigation include Italy, Turkey, and the United Kingdom.
"With
respect to India, the focus of the investigation was on the 2 per cent
'Equalisation Levy' (EL) levied by India on e-commerce supply of
services," an official communique said on Thursday.
"The US
investigation included whether the EL discriminated against the US
companies, was applied retrospectively, and diverged from US or
international tax norms due to its applicability on entities not
resident in India."
As per the communique, the US administration
requested for consultations, and India submitted its comments to the
USTR on July 15, 2020, participated in the bilateral consultation held
on November 5, 2020, emphasising that the EL is not discriminatory.
"It
was also clarified that the EL was applied only prospectively, and has
no extra-territorial application, since it is based on sales occurring
in the territory of India through digital means."
"India based
e-commerce operators are already subject to taxes in India for revenue
generated from Indian market. However, in the absence of the EL,
non-resident e-commerce operators are not required to pay taxes in
respect of the consideration received in the e-commerce supply or
services made in the Indian market."
According to the communique,
the EL levied at 2 per cent is applicable on non-resident e-commerce
operators, not having a permanent establishment in India.
"The
threshold for this levy is Rs 2 crore, which is very moderate and
applies equally to all e-commerce operators across the globe having
business in India."
"The levy does not discriminate against any
US companies, as it applies equally to all non-resident e-commerce
operators, irrespective of their country of residence."
Besides,
it said that there is no retrospective element as the levy was enacted
before April 1, 2020 which is the effective date of the levy.
"It
does not have extra territorial application as it applies only on the
revenue generated from India. In addition, EL was one of the methods
suggested by 2015 OECD/G20 report on 'Action 1 of BEPS Project' which
was aimed at tackling the taxation challenges arising out of
digitisation of the economy."
Similar determinations have also been made against Italy and Turkey by USTR.
"The
Government of India will examine the determination or decision notified
by the US in this regard, and would take appropriate action keeping in
view the overall interest of the nation."
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