Govt should review, defer 2% equalisation levy on non-resident e-commerce companies, says report

equalisation levy, non-resident e-commerce companies, e-commerce, Assocham, Assocham-BMR Legal report, Equalisation Levy 2.0: India's Digital Services Tax in the making, digital economy, Covid-19, Mukesh Butani, BMR Legal, digital service tax, Amit Rana, PwCConcerns surrounding the levy are not just theoretical or one-sided, but the law indeed has a far-reaching impact which necessitates its review, report said.

The government should review and defer the 2 per cent equalisation levy on non-resident e-commerce companies as it has a far-reaching impact, according to a report.

An Assocham-BMR Legal report – Equalisation Levy 2.0: India’s Digital Services Tax in the making – said that there is a need for stakeholder consultations, a wholesome impact assessment, and steering impact on consumers of the digital economy.

Concerns surrounding the levy are not just theoretical or one-sided, but the law indeed has a far-reaching impact which necessitates its review, it said.

“Emphasising the need for stakeholder consultations and a wholesome impact assessment, including considerations arising on account of Covid-19, steering impact on consumers of the digital economy, especially the Indian SMEs, the report recommends deferral of the 2020 Levy accompanied by a thorough assessment of the law and available policy-choices,” the chamber said in a statement.

Mukesh Butani, a partner at BMR Legal, said this levy does not differentiate between the types of digital suppliers, an important facet of global digital service tax imposition pursued by select jurisdictions as part of unilateral measures.

“There is no difference between someone using cloud computing or online shopping services and to club both services is illogical. Similarly, a supplier and a facilitator of supply are taxed at a similar rate. This will have an immediate impact on the cost which impacts the consumers,” he said.

Amit Rana, Partner, PwC said that there is an absence of intent on what the government wanted to tax.

“Every law comes with a statement of objectives. 2020 levy does not have that. So there is a big shortcoming in our ability to interpret,” Rana said.

He also said that most industry players want to comply 100 per cent, but the guidance came in too late.

“The government should consider this and should not impose a penalty or interest on the delay as it is not the fault of the taxpayer,” he added.

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