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Equalisation Levy

India has witnessed exponential growth in the procurement of digital content which dissolves the national boundaries and the link between the income-producing activity and a specific location.

According to the explanatory memorandum to the Finance Bill 2016 (page 5) ,which proposed introduction of the equalisation levy, the typical direct tax issues relating to e-commerce were listed as:

1. Ìý

   •ÌýÌýÌýÌý difficulties of characterizing the nature of payment

2. Ìý

   •ÌýÌýÌýÌý establishing a nexus or link between a taxable transaction and a taxing jurisdiction

3. Ìý

   •ÌýÌýÌýÌý the difficulty of locating the transaction

4. Ìý

   •ÌýÌýÌýÌý identifying the taxpayer for income tax purposes

5. Ìý

   •ÌýÌýÌýÌý permanent establishment rules

The equalisation levy was also recommended by the Organization for Economic Cooperation and Development.

Though the digital services are pre-dominantly provided by corporations, there are many foreign nationals who undertake digital marketing, marketplace aggregation, website services as freelancers. Accordingly, a globally mobile individual engaged in the business of providing these digital services to an Indian resident or a non-resident with a permanent establishment in India will be subject