News By/Courtesy: Jeffy Johnson | 05 Apr 2020 20:11pm IST


  • Equalization levy working
  • The importance of Financial Bill, 2020
  • The functioning of the e-commerce industry

The Central Government has imposed a new tax burden on foreign companies. This new tax levy had been introduced through an amendment in the Financial Bill, 2020. In this financial month of April, all non-resident entities have to equalisation levy every quarter. Now the income that the foreign e-commerce entities generated in India will be subject to tax. The applicability of tax is 2 % on the sale of goods and also on the services that take place through e-commerce foreign operators. Such supplies are subject to equalisation levy in the following circumstances. It should be made by a resident in India or a buyer through an IP address in India and certain cases non-resident. The two challenges are been faced in the implication of this levy. Firstly how should e-commerce players apply it? Secondly, how should they account for cancellation charges, sales return, discount and many more?  To equalisation levy, many foreign e-commerce entities provide a space to buyers and sellers. They receive a fee for such facility provided. For such transactions, the equalisation levy would be levied on the commission paid to foreign e-commerce entities. These entities also work on an inventory model. The tax department has not approved these models yet. As the liability to deposit the equalisation levy is becoming challenging. The matter regarding the account for cancellation, sales return is not spoken in the amendment to the Finance Bill, 2020. In the same manner, the treatment of sales return is open-ended in the e-commerce industry. This shows the efficiency of the Central Government in employing such new tax policies to ensure proper regulation in the foreign e-commerce industry. This makes the burden fall on these foreign entities to function with transparency. This also facilities and paves the way towards proper accountability in this foreign sector. This will maintain the checks and balances in it's working. And at the same time, the government can exercise its control over this sector. But there should not be any excess intervention by the authorities. The working and functioning of this scheme of the new tax burden on foreign companies are yet to be witnessed in its entirety. The coming years will tell us whether is the policy was successful or not.

Section Editor: Pushpit Singh | 05 Apr 2020 21:18pm IST

Tags : Foreign sector imposed with New Tax

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