27 May 2020 Andrea Marshall, Tax Specialist
Thanks to Alison Ambrose at Deloittes who has provided the following update regarding the introduction of the 2% "Equalisation Tax" (similar to a Digital Tax) in India.
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The levy will, based on the current law, apply from 1 April 2020.
Representations are still being made to the Indian Government, including requesting a delay in the implementation of the levy until 1 October 2020 (which would in line with other measures in the Finance Act that have been delayed to October given COVID-19 but is by no means certain). There are rumours in the Indian press that the introduction of the levy might be delayed to September 2020 but nothing has been said officially.
There is no detailed guidance available yet. We understand that guidance and FAQs will be published by the Government but that work on this will not start until after the lockdown period in India ends (currently 31 May). Therefore further guidance is unlikely to be available until early June at the earliest.
The initial view from Deloitte India is that the definitions are sufficiently broad that ‘e-commerce operator’ providing ‘e-commerce supply or services’ could apply to overseas Universities if Indian customers/candidates register for online exams or purchase online courses via an website that is open and available to all.
However it is important to note that if a University has an Indian permanent establishment and the ‘e-commerce supply or services’ is effectively connected with the permanent establishment then the levy would not be applied. There is also a de-minims threshold of INR 20 million (c.£211k) gross receipts.
The first quarter payment (for the period from 1 April to 30 June) falls due on 7 July. Annual filings would also be required and the non-resident entity would be required to obtain a Permanent Account Number (PAN) to the extent that it does not already have one. Further details as to how to register, pay and file are expected once the Indian lockdown has ended.