Central Board of Direct Taxes (CBDT) committee on taxation of e-commerce has suggested an "Equalisation Levy" of between 6-8 percent for business-to-business deals with a view to tax digital transactions.
Based on the recommendations of the committee, which had submitted its report to the government in February, Finance Minister Arun Jaitley in his Budget proposed an Equalisation Levy of 6 per cent to tap tax on income accruing to foreign e-commerce companies from India.
The report, which was made public today, has suggested introduction of the tax based on the Base Erosion and Profit Shifting (BEPS) report which was earlier endorsed by G20 and OECD.
The committee set up by Central Board of Direct Taxes (CBDT) has suggested that Equalisation Levy between 6-8 per cent be imposed on amount paid to non-resident by an Indian resident for specified digital services. It also suggested that this Levy should not be a part of the Income-Tax Act.
The specified services would include online advertising or any services, rights or use of software for online advertising, including advertising on radio & television, designing, hosting or maintenance of websites, digital space for website, e-mails, blogs, facility for online sale of goods or services or collecting online payments.
It would also include use or right to use or download online music, online movies, online games and online software applications accessed or downloaded through the Internet or telecommunication networks.
The budget for the next fiscal has proposed that a person making payment to a non-resident, without a permanent establishment, exceeding in aggregate Rs.1 lakh in a year for online advertisement, will withhold tax at 6 percent of the gross amount paid as an equalisation levy. The levy will only apply to business-to-business transactions.