I-T Dept amends tax challan to include foreign e-commerce firms for equalisation levy

I-T Dept amends tax challan to include foreign e-commerce firms for equalisation levy

Tax challan ITNS 285, used for equalisation levy, now includes 'Outside India' option under address details field, allowing foreign e-commerce players to enter their details and make the due payments

Foreign e-commerce firms, international business associations were seeking deferment of this amendment by a year

The Income Tax Department has amended the online tax form used for paying equalisation levy to include e-commerce players based outside India. This would bring more than two dozen non-resident online retailers supplying goods and services under the purview of equalisation levy.

Introduced in Union Budget 2020-21, the equalisation levy imposes a 2 per cent tax on digital transactions conducted in India by foreign companies. It came into effect on April 1, 2020 and the first instalment is due for payment on July 7, 2020.

The I-T Department has modified challan ITNS 285 - used to pay equalisation levy online - to enable payment of the first instalment by non-resident e-commerce operators. The amended form now adds "e-commerce operator for e-commerce supply or services" under 'Type of Deductor'. The challan also seeks mandatory Permanent Account Number of the deductor.

The most important change in the challan ITNS 285 is that it now includes 'Outside India' option while seeking address details of payees, allowing foreign e-commerce players to enter their details and make the due payments.

The modification to the online tax form for equalisation levy comes even as e-commerce companies and international business associations demanded its deferment by one year. The United States is even investigating whether the digital taxes imposed by India and nine other countries are biased against companies based in the nation.

One of the sticking points to this move is that foreign e-commerce companies will now have only one business day, July 6, to get their PANs before their payments for equalisation levy come due.

"This has rather imposed a burdensome and challenging task for non-resident e-commerce players to apply for and obtain Permanent Account Number within one business day in the midst of curbs, lockdown and pandemic affected business life and also organize the mode of payment through an Indian bank account or debit card issued by an Indian bank," said Nangia Andersen LLP Partner Sandeep Jhunjhunwala.

He further added that non-resident digital companies were waiting for a detailed FAQ to get clarity on abstruse issues surrounding the equalisation levy. "This rushed move could cause substantial challenges in discharging the nearing first payment liability of equalisation levy, in case interest and penalty for delayed payments are to be avoided," he added.

Deloitte India Partner Rohinton Sidhwa said while there have been widespread demands for its deferral due to the pandemic, there are also several parts of the new provisions that require clarification.

Under the new law, the first instalment is due on July 7 for the equalisation levy charged on supplies in the first quarter of the financial year ending June 30.

"The modification of the challan is to facilitate this payment. Earlier this challan only allowed payment for the 6 per cent equalization levy applicable on advertising services that was imposed by Finance Act 2016. Detailed FAQ's and procedural rules are yet to be specified for the new levy," Sidhwa added.

Shardul Amarchand Mangaldas & Co Partner Amit Singhania said, "The changes in payment challan will now enable the payment of equalisation levy by foreign companies. However, the industry was expecting its deferral considering the lack of clarification on few issues."

(With PTI inputs)