Budget 2021 Equalisation Levy: Other foreign e-commerce companies, including Amazon, Flipkart, Google, Zoom, will have to pay 2% additional tax on the sale of goods or services. This provision has been made in Budget 2021. There was confusion on this provision that whether foreign companies working in India, which provide income tax and GST here, will be imposed on them, will it affect customers too? Actually, according to the provisions made in the budget, this provision will only apply to those companies which are not working in India. Due to this provision, there was confusion among the traders as well as the customers. However, the government later clarified the situation on the provision that these rules will apply to foreign-owned eCommerce companies, which do not pay any tax here.
According to the budget proposal, this provision will also be applicable on the sale of goods even if the provider is the owner of the e-commerce portal. Apart from this, companies providing services through e-commerce are also under its purview, provided the service provider itself is an e-commerce operator. In fact, a provision of Equalisation Levy at the rate of 2 percent has been made on 1 April 2020 through the budget 2021 on foreign companies offering various services through foreign e-commerce and internet.
The government had a loss of revenue
Rajeshwar Panuli, senior chartered accountant and knowledgeable about direct tax matters, says there are many e-commerce companies that do not have an office in India. These types of e-commerce portals are being operated by foreign companies located abroad. These companies do not pay any type of tax like income tax or GST to the Indian government, but do a lot of business in India. Due to which the government is losing revenue. In view of this, the government has made provision of 2 per cent additional tax for foreign e-commerce companies.
Panuli said that Finance Minister Nirmala Sitharaman had also given clarification in his budget speech that companies that pay income tax in India should not pay an excise levy of 2 per cent. Panuli clarified that if Amazon sells goods to a person in India through its US portal, it is obliged to pay a 2 percent excise levy here. But, if the same Amazon makes a sale in India through an e-commerce portal operated on behalf of its India-based company, then it will not have to pay the excise levy, because the company based in India pays income tax in India.
Will there be an impact on customers?
Will the increased budgetary levy affect customers who are shaping foreign e-commerce? Penuly says on this issue, this provision of the government will not have any additional impact on the customers. This is because the way the income tax is paid by the company, similarly the excise levy will also be paid on behalf of the company on its sale in India. He said that the levy will be calculated on the annual sales like income tax.
Fame said – Lavy should be 5%
National General Secretary VK Bansal of Federation of All India Trade Board fame said that in the pre-budget suggestions, we had asked the government to impose an additional fee of 5 per cent on sales through all types of e-commerce portals. Bansal said, we welcome the 2 percent excise levy. Also, there is a demand from the Finance Minister that they should increase it to at least 5 percent. India is a very large consumer market and the Indian government is making a big investment in developing this market. If a foreign company does business in the Indian market and pays neither income tax nor GST in India, then the government should levy at least 5% of the excise levy to compensate for the loss of its revenue.
Wrong trade practice will be banned: CAIT
National General Secretary of Confederation of All India Traders (CAIT) CAT, Praveen Khandelwal, says that the proposal extends the definition of ‘online sale of goods’ and ‘online provision of services’. All the confusion about e-commerce will be cleared and it will redefine e-commerce in the country. Khandelwal says that Amazon, Walmart etc. have played with the laws of the country, including the massive violation of FEMA and FDI policy. We hope that the proposed provision will be strictly followed and prevent the interference of lobby organizations like USBC in India’s internal affairs.
Khandelwal states that the same levy was introduced at one level to provide equal grounds for business and to circumvent the circumvention of tax laws on digital transactions. As the OECD and the United Nations are constantly trying to expand the digital economy and bring in a system with a global consensus. However, there have been some changes in the same levy process in India from its initial appearance in 2016 to 2020, and now some more changes have been added to the Finance Bill 2021.