Who actually pays the two per cent equalisation levy, and by when? My client is being told the Indian customer should have withheld it.
It is paid by the non-resident e-commerce operator itself, not withheld by the Indian customer. Section 166A of the Finance Act, 2016 — again, a Finance Act provision and not an Income-tax Act one — requires 'every e-commerce operator' to pay the levy referred to in section 165A(1) to the credit of the Central Government quarterly: by 7 July for the quarter ending 30 June, 7 October for the quarter ending 30 September, 7 January for the quarter ending 31 December, and by 31 MARCH for the quarter ending 31 March. That is the structural opposite of the six per cent levy on specified services, which section 166 makes the Indian payer deduct and pay over, and it is why the Income-tax Act's disallowance in section 40(a)(ib) is written for the six per cent levy and not for this one.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2020-04-01, reported as Section 166A of the Finance Act, 2016, transcribed with its Table from incometaxindia.gov.in/w/section-166a (heading 'Collection and recovery of equalisation levy on e-commerce supply or services', Year: 2016, Act: Finance Acts, footnote 'Inserted by the Finance Act, 2020 w.e.f. 1-4-2020'), and confirmed word for word against section 153(vii) of the Finance Act, 2020 at indiankanoon.org/doc/156332416/. It bears on section 166A, section 166, section 165, section 165A, section 165A(1), section 170, section 171, section 173, section 40(a)(ib) of the Income Tax Act 1961, in Demand, Recovery & Stay and Penalty matters.
The fourth-quarter due date is a trap. For the first three quarters the levy is payable on the seventh day of the month after the quarter ends; for the quarter ending 31 March it is payable ON 31 March, that is, on the last day of the quarter itself and before that quarter has finished. An operator that applies the seven-day pattern to the March quarter is late by definition, and section 170 of the Finance Act 2016 charges interest on delayed payment while section 171 provides a penalty. As inserted by the Finance Act 2020, section 171 carries a penalty for a section 166A default in these terms: 'in addition to the levy in accordance with the provisions of that section, or interest, if any, in accordance with the provisions of section 170, a penalty equal to the amount of equalisation levy that he failed to pay'. The other half of the point matters for Indian buyers: because there is no withholding obligation on a section 165A supply, an Indian customer of a foreign platform has no equalisation levy exposure of its own on that supply, and a demand raised against the Indian customer for the two per cent levy is raised against the wrong person. Conversely, on a section 165 specified-service payment the Indian payer IS the person who must deduct and pay, and the penalty for that default under section 171 is 'a penalty equal to the amount of equalisation levy that he failed to deduct'.
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Not a judgment. Section 166A of the Finance Act, 2016 reads: '166A. Collection and recovery of equalisation levy on e-commerce supply or services.-The equalisation levy referred to in sub-section (1) of section 165A, shall be paid by every e-commerce operator to the credit of the Central Government for the quarter of the financial year ending with the date specified in column (2) of the Table below by the due date specified in the corresponding entry in column (3) of the said Table:' and the Table then sets, against the quarters ending 30th June, 30th September, 31st December and 31st March, the due dates 7th July, 7th October, 7th January and 31st March respectively. By contrast, section 153(vi) of the Finance Act 2020 substituted the marginal heading of section 166 with 'Collection and recovery of equalisation levy on specified services', and section 153(v) substituted, in section 166(1), for the words 'equalisation levy' the words, brackets and figures 'equalisation levy referred to in sub-section (1) of section 165' — so section 166 governs the six per cent levy and section 166A the two per cent levy. On penalties, section 153(xii) of the Finance Act 2020 inserted into section 171 a new clause '(aa) fails to pay the whole or any part of the equalisation levy as required under section 166A; or' and a corresponding consequence '(ia) in the case referred to in clause (aa), in addition to the levy in accordance with the provisions of that section, or interest, if any, in accordance with the provisions of section 170, a penalty equal to the amount of equalisation levy that he failed to pay; and', the pre-existing consequence for a failure to deduct being 'a penalty equal to the amount of equalisation levy that he failed to deduct'.
Not a judgment. The statutory position is that the two per cent equalisation levy on e-commerce supply or services is payable by the e-commerce operator itself under section 166A of the Finance Act, 2016, quarterly, with due dates of 7 July, 7 October, 7 January and 31 March, the last of these falling on the closing day of the quarter it relates to; that there is no obligation on the Indian customer to deduct or pay that levy; that the six per cent levy on specified services is by contrast collected under section 166 from the Indian payer, which is why section 40(a)(ib) of the Income-tax Act speaks of a levy that is 'deductible'; and that a failure to pay under section 166A attracts, besides the levy and interest under section 170, a penalty equal to the amount of the levy not paid.
Not a judgment; no judicial reasoning is stated for the section itself.
The equalisation levy referred to in sub-section (1) of section 165A, shall be paid by every e-commerce operator to the credit of the Central Government for the quarter of the financial year ending with the date specified in column (2) of the Table below by the due date specified in the corresponding entry in column (3) of the said Table:
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Handle my notice → Ask a CA on WhatsAppIt is paid by the non-resident e-commerce operator itself, not withheld by the Indian customer. Section 166A of the Finance Act, 2016 — again, a Finance Act provision and not an Income-tax Act one — requires 'every e-commerce operator' to pay the levy referred to in section 165A(1) to the credit of the Central Government quarterly: by 7 July for the quarter ending 30 June, 7 October for the quarter ending 30 September, 7 January for the quarter ending 31 December, and by 31 MARCH for the quarter ending 31 March. That is the structural opposite of the six per cent levy on specified services, which section 166 makes the Indian payer deduct and pay over, and it is why the Income-tax Act's disallowance in section 40(a)(ib) is written for the six per cent levy and not for this one. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 166A, section 166, section 165, section 165A, section 165A(1), section 170, section 171, section 173, section 40(a)(ib) of the Income Tax Act 1961. It is reported as Section 166A of the Finance Act, 2016, transcribed with its Table from incometaxindia.gov.in/w/section-166a (heading 'Collection and recovery of equalisation levy on e-commerce supply or services', Year: 2016, Act: Finance Acts, footnote 'Inserted by the Finance Act, 2020 w.e.f. 1-4-2020'), and confirmed word for word against section 153(vii) of the Finance Act, 2020 at indiankanoon.org/doc/156332416/. The fourth-quarter due date is a trap. For the first three quarters the levy is payable on the seventh day of the month after the quarter ends; for the quarter ending 31 March it is payable ON 31 March, that is, on the last day of the quarter itself and before that quarter has finished. An operator that applies the seven-day pattern to the March quarter is late by definition, and section 170 of the Finance Act 2016 charges interest on delayed payment while section 171 provides a penalty. As inserted by the Finance Act 2020, section 171 carries a penalty for a section 166A default in these terms: 'in addition to the levy in accordance with the provisions of that section, or interest, if any, in accordance with the provisions of section 170, a penalty equal to the amount of equalisation levy that he failed to pay'. The other half of the point matters for Indian buyers: because there is no withholding obligation on a section 165A supply, an Indian customer of a foreign platform has no equalisation levy exposure of its own on that supply, and a demand raised against the Indian customer for the two per cent levy is raised against the wrong person. Conversely, on a section 165 specified-service payment the Indian payer IS the person who must deduct and pay, and the penalty for that default under section 171 is 'a penalty equal to the amount of equalisation levy that he failed to deduct'. If it applies to you, the first step is this: Identify which levy is in issue before answering anything about who should have paid: section 165 supplies are withheld by the Indian payer under section 166, section 165A supplies are paid by the non-resident operator under section 166A.
Not a judgment. Section 166A of the Finance Act, 2016 reads: '166A. Collection and recovery of equalisation levy on e-commerce supply or services.-The equalisation levy referred to in sub-section (1) of section 165A, shall be paid by every e-commerce operator to the credit of the Central Government for the quarter of the financial year ending with the date specified in column (2) of the Table below by the due date specified in the corresponding entry in column (3) of the said Table:' and the Table then sets, against the quarters ending 30th June, 30th September, 31st December and 31st March, the due dates 7th July, 7th October, 7th January and 31st March respectively. By contrast, section 153(vi) of the Finance Act 2020 substituted the marginal heading of section 166 with 'Collection and recovery of equalisation levy on specified services', and section 153(v) substituted, in section 166(1), for the words 'equalisation levy' the words, brackets and figures 'equalisation levy referred to in sub-section (1) of section 165' — so section 166 governs the six per cent levy and section 166A the two per cent levy. On penalties, section 153(xii) of the Finance Act 2020 inserted into section 171 a new clause '(aa) fails to pay the whole or any part of the equalisation levy as required under section 166A; or' and a corresponding consequence '(ia) in the case referred to in clause (aa), in addition to the levy in accordance with the provisions of that section, or interest, if any, in accordance with the provisions of section 170, a penalty equal to the amount of equalisation levy that he failed to pay; and', the pre-existing consequence for a failure to deduct being 'a penalty equal to the amount of equalisation levy that he failed to deduct'. 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 is payable by the e-commerce operator itself under section 166A of the Finance Act, 2016, quarterly, with due dates of 7 July, 7 October, 7 January and 31 March, the last of these falling on the closing day of the quarter it relates to; that there is no obligation on the Indian customer to deduct or pay that levy; that the six per cent levy on specified services is by contrast collected under section 166 from the Indian payer, which is why section 40(a)(ib) of the Income-tax Act speaks of a levy that is 'deductible'; and that a failure to pay under section 166A attracts, besides the levy and interest under section 170, a penalty equal to the amount of the levy not paid.
Not a judgment; no judicial reasoning is stated for the section itself. In the words reproduced by the source cited on this page: "The equalisation levy referred to in sub-section (1) of section 165A, shall be paid by every e-commerce operator to the credit of the Central Government for the quarter of the financial year ending with the date specified in column (2) of the Table below by the due date specified in the corresponding entry in column (3) of the said Table:"
It was decided by the CBDT Circulars & Instructions on 2020-04-01 and is reported as Section 166A of the Finance Act, 2016, transcribed with its Table from incometaxindia.gov.in/w/section-166a (heading 'Collection and recovery of equalisation levy on e-commerce supply or services', Year: 2016, Act: Finance Acts, footnote 'Inserted by the Finance Act, 2020 w.e.f. 1-4-2020'), and confirmed word for word against section 153(vii) of the Finance Act, 2020 at indiankanoon.org/doc/156332416/. 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 166A, section 166, section 165, section 165A, section 165A(1), section 170, section 171, section 173, section 40(a)(ib), 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 is payable by the e-commerce operator itself under section 166A of the Finance Act, 2016, quarterly, with due dates of 7 July, 7 October, 7 January and 31 March, the last of these falling on the closing day of the quarter it relates to; that there is no obligation on the Indian customer to deduct or pay that levy; that the six per cent levy on specified services is by contrast collected under section 166 from the Indian payer, which is why section 40(a)(ib) of the Income-tax Act speaks of a levy that is 'deductible'; and that a failure to pay under section 166A attracts, besides the levy and interest under section 170, a penalty equal to the amount of the levy not paid. It arises in Demand, Recovery & Stay and Penalty matters, on section 166A, section 166, section 165, section 165A, section 165A(1), section 170, section 171, section 173, section 40(a)(ib) 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. For a section 165A default, check the fourth-quarter date first — the due date for the quarter ending 31 March is 31 March, not 7 April, and most late-payment interest under section 170 on this levy comes from that one line of the Table. If a demand for the two per cent levy has been raised on an Indian customer of the platform, take the point that section 166A imposes the obligation on the e-commerce operator and on no one else. Do not carry the section 40(a)(ib) disallowance across to a section 165A payment: that clause is keyed to consideration 'on which equalisation levy is deductible', and nothing is deductible on an e-commerce supply. Where interest or penalty is proposed, run section 173 of the Finance Act 2016 — the Chapter's own reasonable-cause provision — rather than looking for section 273B of the Income-tax Act.
Still good law. The section and its Table are confirmed on two independent sources — the departmental Finance Acts page stamped Year 2016 and the text of the Finance Act 2020 provision that inserted it — which agree word for word including the 31 March due date. The obligation is spent for consideration received or receivable on or after 1 August 2024 but governs every quarter from the first quarter of 2020-21 to consideration received or receivable before 1 August 2024 — which cuts the quarter ended 30 September 2024, so July 2024 consideration was still chargeable and was payable by 7 October 2024. What I did not do: I could not read sections 166, 170, 171 or 173 of the Finance Act 2016 in their current form and cannot say whether any of them has been amended since 2020; the penalty wording quoted here is the amending Act's, and a penalty order should be answered against the section itself. 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 166A is a section of the FINANCE ACT, 2016, inserted by section 153(vii) of the Finance Act, 2020 with effect from 1 April 2020; the departmental page carries the footnote 'Inserted by the Finance Act, 2020 w.e.f. 1-4-2020'. The Income-tax Act, 1961 has no section 166A, which is why the bare departmental URL serves the Finance Act version. I did NOT read section 166, section 170, section 171 or section 173 of the Finance Act 2016 in their own text: the Income-tax Act has sections of the same numbers and every departmental URL I probed for those numbers returned the Income-tax Act provision (incometaxindia.gov.in/w/section-166 returns 'Direct assessment or recovery not barred', Year: 2000). What is said here about section 166, section 170, section 171 and section 173 is taken only from section 153 of the Finance Act, 2020, which amends each of them by name and quotes the words it inserts. The two penalty formulations quoted are the words of the Finance Act 2020 as it inserted or preserved them, not a transcription of section 171 as it now stands, and the amount and conditions of the section 165 penalty in particular should be checked against section 171 itself before it is relied on. 'tds' is not among this entry's subjects and 'recovery' is used as the closest tag in the fixed vocabulary; the levy is deducted at source in the section 165 case but it is not tax deducted under Chapter XVII-B of the Income-tax Act and should not be tagged as if it were. 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 is payable by the e-commerce operator itself under section 166A of the Finance Act, 2016, quarterly, with due dates of 7 July, 7 October, 7 January and 31 March, the last of these falling on the closing day of the quarter it relates to; that there is no obligation on the Indian customer to deduct or pay that levy; that the six per cent levy on specified services is by contrast collected under section 166 from the Indian payer, which is why section 40(a)(ib) of the Income-tax Act speaks of a levy that is 'deductible'; and that a failure to pay under section 166A attracts, besides the levy and interest under section 170, a penalty equal to the amount of the levy not paid.
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