Cloud computing, online use of app to attract 6% equalisation levy
The committee, comprising senior officials from the finance ministry and the Income-Tax Department, industry representatives, ICAI representative and independent professionals, recommended a rate of 6-8 per cent, though they had favoured 6 per cent rate initially.
- Mar 21, 2016,
- Updated Mar 21, 2016 3:01 PM IST
A committee on taxation of e-commerce has recommended an equalisation levy on specified digital services, including online marketing & advertisement, cloud computing, website design hosting & maintenance, digital space, digital platforms for sale of goods and services and online use or download of software and applications.
The committee, comprising senior officials from the finance ministry and the Income-Tax Department, industry representatives, ICAI representative and independent professionals, recommended a rate of 6-8 per cent, though they had favoured 6 per cent rate initially.
The committee examined three recommendations as per the BEPS (base erosion and profit shifting) action plan on taxation of digital companies. It noted that the first two options - a new nexus based on significant economic presence and withholding tax on digital transactions - would require changes in a number of tax treaties. It observed that the third option of 'Equalization Levy' provides a simpler option that can be adopted under domestic laws without needing amendment of a large number of tax treaties.
The equalization levy on digital transactions would not be a tax on income and, hence, would not be covered by tax treaties. The committee also recommended that the levy be kept outside the Income-Tax Act, 1961, as it is not proposed as tax on income.
The committee recommended that the reporting for the levy be kept simple with the option of online filing of return. It also said that deduction by payment gateways and authorised foreign exchange dealers can significantly reduce obligations on payers.
Amit Maheshwari, Managing Partner of Ashok Maheshwary & Associates, says, "One important issue the committee has taken cognisance of allowing deduction through payment gateways and authorised foreign exchange dealers in order to make the system simpler and easier."
A committee on taxation of e-commerce has recommended an equalisation levy on specified digital services, including online marketing & advertisement, cloud computing, website design hosting & maintenance, digital space, digital platforms for sale of goods and services and online use or download of software and applications.
The committee, comprising senior officials from the finance ministry and the Income-Tax Department, industry representatives, ICAI representative and independent professionals, recommended a rate of 6-8 per cent, though they had favoured 6 per cent rate initially.
The committee examined three recommendations as per the BEPS (base erosion and profit shifting) action plan on taxation of digital companies. It noted that the first two options - a new nexus based on significant economic presence and withholding tax on digital transactions - would require changes in a number of tax treaties. It observed that the third option of 'Equalization Levy' provides a simpler option that can be adopted under domestic laws without needing amendment of a large number of tax treaties.
The equalization levy on digital transactions would not be a tax on income and, hence, would not be covered by tax treaties. The committee also recommended that the levy be kept outside the Income-Tax Act, 1961, as it is not proposed as tax on income.
The committee recommended that the reporting for the levy be kept simple with the option of online filing of return. It also said that deduction by payment gateways and authorised foreign exchange dealers can significantly reduce obligations on payers.
Amit Maheshwari, Managing Partner of Ashok Maheshwary & Associates, says, "One important issue the committee has taken cognisance of allowing deduction through payment gateways and authorised foreign exchange dealers in order to make the system simpler and easier."