CBDT issues new guidelines to streamline digital economy tax

CBDT issues new guidelines to streamline digital economy tax 

Recently the Central Board of Direct Taxes (CBDT) has issued new norms for processing of ‘Equalisation Levy’.

These provisions are part of the Centralized Processing Plan-2023 related to ‘Equalisation Levy’ details. This scheme is related to the processing of details received under the Finance Act, 2016.

Currently, there are some deficiencies in the process of processing ‘Equalisation Levy’ statements. This has also created certain uncertainties especially with regard to claims for refund.

Equalisation Levy-

  • Equalization Levy is a direct tax. It was introduced in 2016 to tax the digital economy. It is also called Google tax.
  • In 2016, EL was introduced in India at 6% on payments received by non-resident e-commerce operators (ECOs) for digital advertising services.
  • In 2020 (EL 2.0), its scope was expanded. Under the new levy, a 2% tax is levied on gross revenue derived by a non-resident ECO from ‘e-commerce supply or supply of services to a resident Indian or non-resident companies having permanent establishment in India’.

Salient Features of Revised Norms-

  • The ‘Equalisation Levy’ statements will be processed electronically by the Centralized Processing Center of the Income Tax Department.
  • A new provision has been added for faceless communication.
  • The Organization for Economic Co-operation and Development (OECD) has come up with a ‘two-pillar solution’ to address the tax challenges arising out of the digitization of the economy.
  • About 138 countries including India have agreed on this. Once adopted, it will replace unilateral measures or levies like the ‘Equalisation Levy’ in India.
  • Pillar One: 25% of the residual profits of approximately 100 of the largest and most profitable multinational companies will be re-allocated to the market jurisdictions where the users of the companies are located.
  • Pillar Two: A global minimum tax of 15% will be levied on corporate profits of multinational companies (MNCs). This tax will be imposed on those MNCs whose annual global revenue exceeds 750 million Euros.

Source – Live Mint

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