The Finance Act, 2016 introduced a new Chapter VIII called Equalisation Levy (EL)

Extent, commencement and application

This Chapter extends to the whole of India except the State of Jammu and Kashmir and comes to force from 1st June 2016. The Ministry of Finance has also Notified Rules vide Notification S. O. 1905 (E), dated 27th May, 2016.

Definitions

Most of the definitions are borrowed from the Income-tax Act such as "Appellate Tribunal", "Assessing Officer", "Board", "Income-tax Act", etc. Further, it has specifically mentioned that words and expressions used but not defined in this Chapter and defined in the Income-tax Act, or the rules made thereunder, shall have the meanings respectively assigned to them in that Act.

Other relevant definitions are as under:

"Equalisation levy" means the tax leviable on consideration received or receivable for any specified service under the provisions of this Chapter;

"Online" means a facility or service or right or benefit or access that is obtained through the internet or any other form of digital or telecommunication network;

"Prescribed" means prescribed by rules made under this Chapter;

"Specified service" means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf;

Charge of equalisation levy

An equalisation levy is applicable at the rate of six per cent of the amount of consideration for any specified service received or receivable by a person, being a non-resident from—

1. A person resident in India and carrying on business or profession; or

2. A non-resident having a permanent establishment in India.

Exceptions to the above:

1. The non-resident providing the specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment;

2. The aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed one lakh rupees; or

3. Where the payment for the specified service by the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession.

Collection and recovery of equalisation levy

Every assessee shall deduct the equalisation levy from the amount paid or payable to a non-resident in respect of the specified service at the rate six per cent, if the aggregate amount of consideration for specified service in a previous year exceeds one lakh rupees.

Payment of EL: The equalisation levy so deducted during any calendar month shall be paid by the seventh day of the month immediately following the said calendar month by remitting into Reserve Bank of India, State Bank of India or any bank authorised for the purpose along with Equalisation Levy Challan.

Failure to deduct: Any assessee who fails to deduct the levy, be liable to pay the levy himself in addition to interest and penalty.

Furnishing of statement

Due Date for Statement: Every assessee shall, by 30th June after the end of each financial year, prepare and deliver a statement in Form 1, duly verified in the manner indicated and furnished in the following manner:-

1. Electronically under digital signature; or

2. Electronically through electronic verification code

Belated/Revised Statement: An assessee who has not furnished the statement within the time prescribed or notices any omission or wrong particular therein, may furnish at any time before the expiry of two years from the end of the financial year in which the specified service was provided.

Notice by AO: Where any assessee fails to furnish the statement, the Assessing Officer may serve a notice to furnish the statement.

Processing of statement

Statement shall be processed

1. After making the adjustment for any arithmetical error in the statement;

2. Computing interest if any;

3. The sum payable by, or the amount of refund due to, the assessee;

4. An intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to him shall serve upon the assessee a notice of demand in Form No. 2 specifying the sum so payable. The intimation under the said section shall be deemed to be a notice of demand and no intimation shall be sent after the expiry of one year from the end of the financial year in which the statement is furnished.;

5. The amount of refund due to the assessee shall be granted to him:

Rectification of mistake

The Assessing Officer may amend any intimation, within one year from the end of the financial year in which the intimation sought to be amended was issued. Such amendments may be either suo motu or on any mistake brought to notice by the assessee.

Interest on delayed payment of equalisation levy

Failure to pay the equalisation levy, shall be liable to pay simple interest at the rate of one per cent of such levy for every month or part of a month.

Penalty for failure to deduct or pay equalisation levy

Any assessee who —

Fails to deduct the whole or any part of the equalisation levy will be liable to pay a penalty equal to the amount of equalisation levy that he failed to deduct;

Or after deducting, fails to pay, in addition to paying the levy and interest, a penalty of one thousand rupees for every day during which the failure continues, however, that the penalty under this clause shall not exceed the amount of equalisation levy that he failed to pay.

Penalty for failure to furnish statement

Where an assessee fails to furnish the statement within the time, shall be liable to pay a penalty of one hundred rupees for each day during which the failure continues.

Penalty not to be imposed in certain cases

No penalty shall be imposable for any failure referred to in the said sections, if the assessee proves to the satisfaction of the Assessing Officer that there was reasonable cause for the said failure. Further, assessee shall be given a reasonable opportunity of being heard.

Appeal to Commissioner of Income Tax (Appeals)

An assessee aggrieved by an order imposing penalty under this Chapter, may appeal to the Commissioner of Income-tax (Appeals) in Form 3 within a period of thirty days from the date of receipt of the order of the Assessing Officer.

Appeal to Appellate Tribunal

An assessee aggrieved by an order made by the Commissioner of Income Tax (Appeals) may appeal to the Appellate Tribunal against such order or The Commissioner of Income-tax may, if he objects to any order passed by the Commissioner of Income Tax (Appeals), direct the Assessing Officer to appeal to the Appellate Tribunal in Form 4 against such order within a period of 60 days from the receipt of the order.

Application of certain provisions of Income-tax Act

The provisions of sections 120, 131, 133A, 138, 156, Chapter XV and sections 220 to 227, 229, 232, 260A, 261, 262, 265 to 269, 278B, 280A, 280B, 280C, 280D, 282 and 288 to 293 of the Income-tax Act shall so far as may be, apply in relation to equalisation levy, as they apply in relation to income-tax.