A foreign platform sold to Indian customers. Was it liable to the two per cent equalisation levy on its own receipts, what was the threshold, and when did that levy end?
The two per cent levy is charged by section 165A of the Finance Act, 2016 — again, not by the Income-tax Act. It was inserted with effect from 1 April 2020 and charges two per cent of the consideration received or receivable by a NON-RESIDENT e-commerce operator from e-commerce supply or services made or provided or facilitated by it to a person resident in India, to a non-resident in the 'specified circumstances', or to a person who buys using an internet protocol address located in India. It is not charged where the operator has an Indian permanent establishment with which the supply is effectively connected, where the six per cent levy under section 165 is leviable, or where the operator's sales, turnover or gross receipts from e-commerce supply or services are less than TWO CRORE RUPEES during the previous year. Sub-section (4) ends the charge: it does not apply to consideration received or receivable on or after 1 AUGUST 2024.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2020-04-01, reported as Section 165A of the Finance Act, 2016, transcribed from incometaxindia.gov.in/w/section-165a (heading 'Charge of equalisation levy on e-commerce supply of services', Year: 2016, Act: Finance Acts); the section as originally inserted transcribed independently from section 153 of the Finance Act, 2020 at indiankanoon.org/doc/156332416/; the sub-section (3) restructuring transcribed from section 171 of the Finance Act, 2021 at indiankanoon.org/doc/101662731/. It bears on section 165A, section 165A(1), section 165A(2), section 165A(3), section 165A(4), section 165, section 164, section 166A, section 163(3), section 10(50) of the Income Tax Act 1961, in How Tax Law Is Read and Assessment & Scrutiny matters.
This levy is structurally different from the six per cent levy and the difference decides who is on the hook. There is no deduction at source: the non-resident operator itself is liable and pays quarterly under section 166A. That is why section 40(a)(ib) of the Income-tax Act, which disallows a payer's expenditure for failure to deduct or pay 'equalisation levy ... deductible', is written for the section 165 levy and does not reach this one. Three parts of section 165A are where the arguments are. First, the threshold in sub-section (2)(iii) is not a threshold on the Indian receipts alone: the words are 'sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated as referred to in sub-section (1)', and sub-section (1) is itself India-facing, so the measure has to be read against sub-section (1) and not against the operator's global turnover. Second, clause (b) of sub-section (3), inserted retrospectively with effect from 1 April 2020 by the Finance Act 2021, sweeps in consideration for goods the operator does not own and services it merely facilitates, while carving out goods owned by, and services provided by, an Indian resident or an Indian permanent establishment where the sale or provision is effectively connected with that establishment. That clause is what makes a pure marketplace liable on the gross value it facilitates. Third, the cut-off is drafted by reference to consideration received or receivable on or after 1 August 2024, and that date does not fall at the end of a quarter, so it cuts the quarter itself in two: consideration received or receivable up to 31 July 2024 was chargeable and consideration received or receivable on or after 1 August 2024 was not. The quarter ending 30 June 2024 was chargeable in full and was payable by 7 July 2024; the quarter ending 30 September 2024 was chargeable only as to its July receipts, which were payable by 7 October 2024; and nothing thereafter was chargeable at all.
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Not a judgment. Section 165A of the Finance Act, 2016, as printed on the departmental page, reads: '165A. (1) On and from the 1st day of April, 2020, there shall be charged an equalisation levy at the rate of two per cent. of the amount of consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it- (i) to a person resident in India; or (ii) to a non-resident in the specified circumstances as referred to in sub-section (3); or (iii) to a person who buys such goods or services or both using internet protocol address located in India. (2) The equalisation levy under sub-section (1) shall not be charged- (i) where the e-commerce operator making or providing or facilitating e-commerce supply or services has a permanent establishment in India and such e-commerce supply or services is effectively connected with such permanent establishment; (ii) where the equalisation levy is leviable under section 165; or (iii) sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated as referred to in sub-section (1) is less than two crore rupees during the previous year. (3) For the purposes of this section- (a) "specified circumstances" mean- (i) sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though internet protocol address located in India; and (ii) sale of data, collected from a person who is resident in India or from a person who uses internet protocol address located in India. (b) consideration received or receivable from e-commerce supply or services shall include- (i) consideration for sale of goods irrespective of whether the e-commerce operator owns the goods, so, however, that it shall not include consideration for sale of such goods which are owned by a person resident in India or by a permanent establishment in India of a person non-resident in India, if sale of such goods is effectively connected with such permanent establishment. (ii) consideration for provision of services irrespective of whether service is provided or facilitated by the e-commerce operator, so, however, that it shall not include consideration for provision of services which are provided by a person resident in India or by permanent establishment in India of a person non-resident in India, if provision of such services is effectively connected with such permanent establishment. (4) The provisions of this section shall not apply to any consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it on or after the 1st day of August, 2024.' The two definitions the section runs on were inserted into section 164 by section 153(ii)(A) of the Finance Act 2020 in these words: '(ca) "e-commerce operator" means a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both; (cb) "e-commerce supply or services" means- (i) online sale of goods owned by the e-commerce operator; or (ii) online provision of services provided by the e-commerce operator; or (iii) online sale of goods or provision of services or both, facilitated by the e-commerce operator; or (iv) any combination of activities listed in clause (i), (ii) or clause (iii);'. The Finance Act 2021 added an Explanation to that clause providing that '"online sale of goods" and "online provision of services" shall include one or more of the following online activities, namely:- (a) acceptance of offer for sale; or (b) placing of purchase order; or (c) acceptance of the purchase order; or (d) payment of consideration; or (e) supply of goods or provision of services, partly or wholly'.
Not a judgment. The statutory position is that the two per cent equalisation levy on e-commerce supply or services was imposed by section 165A of the Finance Act, 2016 and not by the Income-tax Act; that it was charged on the non-resident e-commerce operator's own consideration and not by deduction at source; that it applied from 1 April 2020 and did not apply where the operator had an effectively connected Indian permanent establishment, where the section 165 levy was leviable, or where the operator's sales, turnover or gross receipts from the supplies described in sub-section (1) were less than two crore rupees in the previous year; that by sub-section (3)(b), inserted retrospectively from 1 April 2020, the measure includes consideration for goods the operator does not own and services it merely facilitates, subject to the carve-outs for Indian residents and effectively connected Indian permanent establishments; and that by sub-section (4) the charge does not apply to consideration received or receivable on or after 1 August 2024.
Not a judgment; no judicial reasoning is stated for the section itself. The retrospective character of the sub-section (3) restructuring is Parliament's own: section 171(a) of the Finance Act, 2021 provides that the amendments in that clause 'shall be made and shall be deemed to have been made with effect from the 1st day of April, 2020'.
(4) The provisions of this section shall not apply to any consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it on or after the 1st day of August, 2024.
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Handle my notice → Ask a CA on WhatsAppThe two per cent levy is charged by section 165A of the Finance Act, 2016 — again, not by the Income-tax Act. It was inserted with effect from 1 April 2020 and charges two per cent of the consideration received or receivable by a NON-RESIDENT e-commerce operator from e-commerce supply or services made or provided or facilitated by it to a person resident in India, to a non-resident in the 'specified circumstances', or to a person who buys using an internet protocol address located in India. It is not charged where the operator has an Indian permanent establishment with which the supply is effectively connected, where the six per cent levy under section 165 is leviable, or where the operator's sales, turnover or gross receipts from e-commerce supply or services are less than TWO CRORE RUPEES during the previous year. Sub-section (4) ends the charge: it does not apply to consideration received or receivable on or after 1 AUGUST 2024. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 165A, section 165A(1), section 165A(2), section 165A(3), section 165A(4), section 165, section 164, section 166A, section 163(3), section 10(50) of the Income Tax Act 1961. It is reported as Section 165A of the Finance Act, 2016, transcribed from incometaxindia.gov.in/w/section-165a (heading 'Charge of equalisation levy on e-commerce supply of services', Year: 2016, Act: Finance Acts); the section as originally inserted transcribed independently from section 153 of the Finance Act, 2020 at indiankanoon.org/doc/156332416/; the sub-section (3) restructuring transcribed from section 171 of the Finance Act, 2021 at indiankanoon.org/doc/101662731/. This levy is structurally different from the six per cent levy and the difference decides who is on the hook. There is no deduction at source: the non-resident operator itself is liable and pays quarterly under section 166A. That is why section 40(a)(ib) of the Income-tax Act, which disallows a payer's expenditure for failure to deduct or pay 'equalisation levy ... deductible', is written for the section 165 levy and does not reach this one. Three parts of section 165A are where the arguments are. First, the threshold in sub-section (2)(iii) is not a threshold on the Indian receipts alone: the words are 'sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated as referred to in sub-section (1)', and sub-section (1) is itself India-facing, so the measure has to be read against sub-section (1) and not against the operator's global turnover. Second, clause (b) of sub-section (3), inserted retrospectively with effect from 1 April 2020 by the Finance Act 2021, sweeps in consideration for goods the operator does not own and services it merely facilitates, while carving out goods owned by, and services provided by, an Indian resident or an Indian permanent establishment where the sale or provision is effectively connected with that establishment. That clause is what makes a pure marketplace liable on the gross value it facilitates. Third, the cut-off is drafted by reference to consideration received or receivable on or after 1 August 2024, and that date does not fall at the end of a quarter, so it cuts the quarter itself in two: consideration received or receivable up to 31 July 2024 was chargeable and consideration received or receivable on or after 1 August 2024 was not. The quarter ending 30 June 2024 was chargeable in full and was payable by 7 July 2024; the quarter ending 30 September 2024 was chargeable only as to its July receipts, which were payable by 7 October 2024; and nothing thereafter was chargeable at all. If it applies to you, the first step is this: Establish whether the client is an 'e-commerce operator' as section 164 defines it — a non-resident who owns, operates or manages a digital or electronic facility or platform for online sale of goods or online provision of services or both. If it is resident in India the levy never applied.
Not a judgment. Section 165A of the Finance Act, 2016, as printed on the departmental page, reads: '165A. (1) On and from the 1st day of April, 2020, there shall be charged an equalisation levy at the rate of two per cent. of the amount of consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it- (i) to a person resident in India; or (ii) to a non-resident in the specified circumstances as referred to in sub-section (3); or (iii) to a person who buys such goods or services or both using internet protocol address located in India. (2) The equalisation levy under sub-section (1) shall not be charged- (i) where the e-commerce operator making or providing or facilitating e-commerce supply or services has a permanent establishment in India and such e-commerce supply or services is effectively connected with such permanent establishment; (ii) where the equalisation levy is leviable under section 165; or (iii) sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated as referred to in sub-section (1) is less than two crore rupees during the previous year. (3) For the purposes of this section- (a) "specified circumstances" mean- (i) sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though internet protocol address located in India; and (ii) sale of data, collected from a person who is resident in India or from a person who uses internet protocol address located in India. (b) consideration received or receivable from e-commerce supply or services shall include- (i) consideration for sale of goods irrespective of whether the e-commerce operator owns the goods, so, however, that it shall not include consideration for sale of such goods which are owned by a person resident in India or by a permanent establishment in India of a person non-resident in India, if sale of such goods is effectively connected with such permanent establishment. (ii) consideration for provision of services irrespective of whether service is provided or facilitated by the e-commerce operator, so, however, that it shall not include consideration for provision of services which are provided by a person resident in India or by permanent establishment in India of a person non-resident in India, if provision of such services is effectively connected with such permanent establishment. (4) The provisions of this section shall not apply to any consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it on or after the 1st day of August, 2024.' The two definitions the section runs on were inserted into section 164 by section 153(ii)(A) of the Finance Act 2020 in these words: '(ca) "e-commerce operator" means a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both; (cb) "e-commerce supply or services" means- (i) online sale of goods owned by the e-commerce operator; or (ii) online provision of services provided by the e-commerce operator; or (iii) online sale of goods or provision of services or both, facilitated by the e-commerce operator; or (iv) any combination of activities listed in clause (i), (ii) or clause (iii);'. The Finance Act 2021 added an Explanation to that clause providing that '"online sale of goods" and "online provision of services" shall include one or more of the following online activities, namely:- (a) acceptance of offer for sale; or (b) placing of purchase order; or (c) acceptance of the purchase order; or (d) payment of consideration; or (e) supply of goods or provision of services, partly or wholly'. The matter was decided on 2020-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. The statutory position is that the two per cent equalisation levy on e-commerce supply or services was imposed by section 165A of the Finance Act, 2016 and not by the Income-tax Act; that it was charged on the non-resident e-commerce operator's own consideration and not by deduction at source; that it applied from 1 April 2020 and did not apply where the operator had an effectively connected Indian permanent establishment, where the section 165 levy was leviable, or where the operator's sales, turnover or gross receipts from the supplies described in sub-section (1) were less than two crore rupees in the previous year; that by sub-section (3)(b), inserted retrospectively from 1 April 2020, the measure includes consideration for goods the operator does not own and services it merely facilitates, subject to the carve-outs for Indian residents and effectively connected Indian permanent establishments; and that by sub-section (4) the charge does not apply to consideration received or receivable on or after 1 August 2024.
Not a judgment; no judicial reasoning is stated for the section itself. The retrospective character of the sub-section (3) restructuring is Parliament's own: section 171(a) of the Finance Act, 2021 provides that the amendments in that clause 'shall be made and shall be deemed to have been made with effect from the 1st day of April, 2020'. In the words reproduced by the source cited on this page: "(4) The provisions of this section shall not apply to any consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it on or after the 1st day of August, 2024."
It was decided by the CBDT Circulars & Instructions on 2020-04-01 and is reported as Section 165A of the Finance Act, 2016, transcribed from incometaxindia.gov.in/w/section-165a (heading 'Charge of equalisation levy on e-commerce supply of services', Year: 2016, Act: Finance Acts); the section as originally inserted transcribed independently from section 153 of the Finance Act, 2020 at indiankanoon.org/doc/156332416/; the sub-section (3) restructuring transcribed from section 171 of the Finance Act, 2021 at indiankanoon.org/doc/101662731/. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 165A, section 165A(1), section 165A(2), section 165A(3), section 165A(4), section 165, section 164, section 166A, section 163(3), section 10(50), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not a judgment. The statutory position is that the two per cent equalisation levy on e-commerce supply or services was imposed by section 165A of the Finance Act, 2016 and not by the Income-tax Act; that it was charged on the non-resident e-commerce operator's own consideration and not by deduction at source; that it applied from 1 April 2020 and did not apply where the operator had an effectively connected Indian permanent establishment, where the section 165 levy was leviable, or where the operator's sales, turnover or gross receipts from the supplies described in sub-section (1) were less than two crore rupees in the previous year; that by sub-section (3)(b), inserted retrospectively from 1 April 2020, the measure includes consideration for goods the operator does not own and services it merely facilitates, subject to the carve-outs for Indian residents and effectively connected Indian permanent establishments; and that by sub-section (4) the charge does not apply to consideration received or receivable on or after 1 August 2024. It arises in How Tax Law Is Read and Assessment & Scrutiny matters, on section 165A, section 165A(1), section 165A(2), section 165A(3), section 165A(4), section 165, section 164, section 166A, section 163(3), section 10(50) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Test the two crore threshold against the receipts described in sub-section (1), and record the working: this is a per-previous-year test and crossing it makes the whole of the chargeable consideration liable, not just the excess. Run the two exclusions in sub-section (2)(i) and (ii) before the threshold: an effectively connected Indian permanent establishment, or leviability of the section 165 levy on the same consideration, takes the receipt out of section 165A entirely. For a marketplace, work through sub-section (3)(b) item by item — goods owned by an Indian resident or by an Indian permanent establishment, where the sale is effectively connected with that establishment, are outside the measure even though facilitated by the operator. Split financial year 2024-25 at 1 August 2024 and reconcile the quarterly payments under section 166A against that split before answering any demand for that year.
Still good law. The text is the current text of a spent charge: sub-sections (1) to (3) are stated as the departmental page prints them, and sub-sections (1), (2) and (3)(a) were independently confirmed word for word against the Finance Act 2020 provision that inserted them and sub-section (3)(b) against the Finance Act 2021 provision that added it. The 1 August 2024 cut-off in sub-section (4) is independently corroborated from the Income-tax Act side: section 10(50)(ii), as reproduced by the ITAT Mumbai on 30 December 2025 and re-read on a separate fragment query, confines the exemption to e-commerce supply or services 'made or provided or facilitated on or after the 1st day of April, 2020 but before the 1st day of August, 2024'. What I did not do: I could not verify from a government source which Finance Act inserted sub-section (4), and I did not read section 164 itself, so the definitions quoted here are as the amending Acts enacted them and may since have been further amended. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Section 165A is a section of the FINANCE ACT, 2016, inserted by section 153(iv) of the Finance Act, 2020 with effect from 1 April 2020. The Income-tax Act, 1961 has no section 165A, which is why the bare departmental URL incometaxindia.gov.in/w/section-165a serves the Finance Act version; the page states the heading 'Charge of equalisation levy on e-commerce supply of services', 'Year: 2016' and Act 'Finance Acts'. The heading as printed says 'supply of services' where the section's own text says 'supply or services'; that discrepancy is in the source and is not a transcription error here. Sub-section (3) was restructured, and clause (b) added, by section 171(a)(iii) of the Finance Act, 2021, which provides that those amendments 'shall be deemed to have been made with effect from the 1st day of April, 2020' — so clause (b) applies retrospectively to the whole life of the levy. The Finance Act 2021 text as transcribed from indiankanoon contains obvious corruptions ('whether the e-commerce operator goods', 'the commerce operator', 'permanent, establishment'); the departmental page prints the same clause cleanly and I have taken the departmental wording. That same Finance Act 2021 provision refers to 'section 164, in clause (ch)' where the Finance Act 2020 had inserted clauses (ca) and (cb); one of the two is a misprint and I could not resolve which, having been unable to read section 164 itself. `decided_on` is the commencement of this charge, 1 April 2020, taken from the words of sub-section (1) and from the Finance Act 2020's own commencement words, and is not a page vintage. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not a judgment. The statutory position is that the two per cent equalisation levy on e-commerce supply or services was imposed by section 165A of the Finance Act, 2016 and not by the Income-tax Act; that it was charged on the non-resident e-commerce operator's own consideration and not by deduction at source; that it applied from 1 April 2020 and did not apply where the operator had an effectively connected Indian permanent establishment, where the section 165 levy was leviable, or where the operator's sales, turnover or gross receipts from the supplies described in sub-section (1) were less than two crore rupees in the previous year; that by sub-section (3)(b), inserted retrospectively from 1 April 2020, the measure includes consideration for goods the operator does not own and services it merely facilitates, subject to the carve-outs for Indian residents and effectively connected Indian permanent establishments; and that by sub-section (4) the charge does not apply to consideration received or receivable on or after 1 August 2024.
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