Understanding Equalisation Levy: Online Advertising & E-commerce
The Equalisation Levy was introduced by the Finance Act, 2016 on consideration received by non-residents for online advertisement services, digital advertising space, and related online advertising facilities, at the rate of 6%. The Finance Act, 2020 expanded its scope by imposing a 2% levy on consideration received or receivable by non-resident e-commerce operators for e-commerce supply or services made, provided, or facilitated on or after 1 April 2020. The levy applied to online sales, online services, and transactions facilitated through digital platforms, subject to specified thresholds and exclusions, including cases involving permanent establishments in India and income taxable as royalty or fees for technical services. Income chargeable to Equalisation Levy was exempt under Section 10(50). The Finance (No. 2) Act, 2024 introduced a sunset clause, providing that Equalisation Levy on e-commerce supply or services would not apply to consideration received or receivable on or after 1 August 2024. Consequently, the provisions of Equalisation Levy are not applicable from Assessment Year 2026-27 onward.
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