Centre rules out FAQ on Equalisation Levy, says law very clear

New Delhi: The government on Thursday ruled out coming out with an FAQ on the newly introduced 2 per cent tax on non-resident e-commerce companies, saying the law passed by Parliament is very clear.

The 2 per cent Equalisation Levy was introduced in the 2020-21 Budget and came into effect from April 1, 2020. The tax would be levied on consideration received by non-resident e-commerce operators from online supply of goods or services. The due date for payment of first instalment of the tax was July 7.

Several tax experts have demanded that the tax department comes out with a Frequently Asked Question (FAQ) to clarify the doubts relating to the levy.

Finance Secretary Ajay Bhushan Pandey said FAQs are issued where you have to explain to somebody who is not familiar with tax laws and there you try to explain in simple words.

"Here the law is very clear. If you see the entire digital tax law, they are not very lengthy or complicated. Every company which deals with digital tax has tax advisors. They can make their own interpretation and take decision. So superimposing something which has been approved by Parliament by way of something like FAQ is not a very good practice," Pandey said at a FICCI event here.

Pandey, who is also the Revenue Secretary, said that many times the question that comes from businesses is that "if a transaction is this, then do I have to pay digital tax?"?

"The question is it is almost like I'm giving an advance ruling, which is not the job of revenue department. If any advance ruling is to be done, then one has to talk to tax advisor. Whatever I say has to strictly conform to the interpretation that we are taking in law. According to us the law is very clear, what Parliament has approved that can be read by everyone and then appropriate decision can be taken by those companies which have to pay digital tax," the secretary added.

Equalisation levy was first introduced by Finance Act, 2016, at the rate of 6 per cent on payments for digital advertisement services received by non-resident companies without a permanent establishment (PE) here, if these exceeded Rs 1 lakh a year.

The Budget 2020-21 expanded its scope to include consideration received by non-resident e-commerce operators from e-commerce supply or services. The rate applicable has been set at 2 per cent.