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Decoding equalisation levy for e-commerce sector: E-retailers may pass cost burden to sellers, consumers

Decoding equalisation levy for e-commerce sector: E-retailers may pass cost burden to sellers, consumers

Equalisation Levy (EL) was introduced in India in 2016. However, it became more intensive in scope and reach, and was slipped surreptitiously into the Finance Act, 2020 just before passage of the Budget, without any debate and discussions. The new EL was to come into effect from April 1, 2020, giving foreign companies operating in the digital space less than 10 days’ notice. The scope and reach of the revised EL came as a bolt from the blue for all stakeholders, as the broadest digital tax currently levied or proposed across the globe. In its present form, the EL proposes to levy 2 per cent tax on all non-residents engaged or facilitating the online sale of goods or services subject to certain conditions, in addition to the existing levy of 6 per cent on online advertisements. The EL is required to be paid directly by the non-resident, implying that no grossing up is possible.

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