Thursday, February 25, 2021
INTRODUCTION
The infamous amendment by the Finance Act, 2020 expanded the scope of Equalization Levy (“EL”) to apply EL on the amount of ‘consideration received or receivable’ by an e-commerce operator from e-commerce supply or services made or provided or facilitated by or through it to specified persons (“Expanded EL”).
The Memorandum to the Finance Bill, 2021 (“Finance Bill”) notes that the Government felt the need to provide certain clarifications to correctly reflect the intention of certain provisions of the Expanded EL. The changes have brought with them further questions and potentially unintended consequences.
However, there are further doubts now regarding whether the scope of the Expanded EL is large enough to cover situations where even a communications platform or a payment aggregator could be covered within its scope, even though no commission is earned by it. For example, if a non-resident platform enables users to message each other and two parties agree to sell a tangible good, would such platform be required to deduct EL at 2% even though it provides free services to the users, may not even be aware of the transaction happening and in any case is not responsible in any ways for collecting or settling payments between the users.