6% Tax on Digital Advertising w.e.f 1st June, 2016

The Digital Media Services has got costlier with the applicability of ‘Krishi Kalyan Cess’ and the ‘Equalisation Levy (EQL)’ or the ‘Google Tax’ from 1^st June, 2016

The revenues of most foreign internet companies are usually routed to a tax haven country. To tackle and tax this transaction EQL is levied to indirectly tax the internet giants like Google and Facebook for the money they make from Indian advertisers.

1. The Central Board of Direct Taxes (“CBDT”) has notified the new ‘Equalisation Levy Rules, 2016’ with effect from 1^st June, 2016 vide Notification No. 38/2016 dated 27^th May, 2016.
2. The EQL will be deducted at the rate of 6% (SIX PERCENT) at source on payments for specified services received or receivable by a non-resident.
3. The said payments shall be made by resident in India, who carries out business or profession, to a non-resident not having Permanent Establishment (‘PE’) in India.
4. The tax is also to be deducted in case payment is made by non-resident having Permanent Establishment in India.
5. EQL is to be deducted if the aggregate amount of consideration for specified service in previous year does not exceed Rs. 1,00,000 (Rupees One Lakh).
6. For the purpose of this levy, the term “Specified Service” shall mean online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf.
7. The word ‘Online’ holds a major importance in this term and means “a facility or service or right or benefit or access that is obtained through the internet or any other form of digital or telecommunication network”.
8. No EQL is to be deducted if:
   1. Non-Resident has Permanent Establishment in India.
   2. Aggregate amount of consideration is less that Rs. 1,00,000.
   3. Payment is made for specified service not for the purpose of carrying out business or profession.
9. The tax, like TDS, has to be deposited with the government by the 7^th day of the succeeding month.
10.  Tax is to be deposited even if the Service Receiver fails to deduct EQL on payment.
11. The statement of specified services procured starting 1^st June, 2016 has to be reported in the statement to be furnished by 30^th June, 2017.

Late payment Interest of 1% is payable on non-payment of Equalisation Levy with the government.