The US Trade Representative had on January 6, 2021 released its findings on the Section 301 investigation into India’s Digital Services Tax (DST) and concluded that the equalisation levy is discriminatory and restricts US commerce.
- However, India on January 7, 2021 said that two per cent equalisation levy does not discriminate against any US company as it applies equally to all non-resident e-commerce operators, irrespective of their country of residence.
What is an equalisation levy?
- In 2016, the equalisation levy was introduced on online sale of advertisements charged at 6 per cent as a withholding tax on the payers.
- The Finance Act 2020 expanded the scope of 2016 equalisation levy to include e-commerce transactions.
- The Act introduced Section 153(iv), which added Section 165A to the Finance Act 2016 to put equalisation levy charged at 2 per cent on the non-resident e-commerce operators with a turnover of over Rs 2 crore..
- The equalisation levy on e-commerce transactions came into force from 1 April, 2020.
- The e-commerce operator means a non resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both.
