VittSphere ONE Calculators Blog CA Prabhakar Kumar · FCA · ICAI 560762
Case lawCBDT Circulars & Instructions › Statutory position — the equalisation levy is charged by Chapter VIII of the Finance Act, 2016 and not by the Income-tax Act: what the Chapter contains, when it commenced, and the two different dates on which the two levies stopped
CBDT Circulars & InstructionsCuts both wayss.163s.163(2)s.163(3)s.164s.165s.165As.166s.166As.167s.168s.169s.170s.171s.172s.173s.174s.175s.178s.179s.180s.10(50)s.40(a)(ib)

Statutory position — the equalisation levy is charged by Chapter VIII of the Finance Act, 2016 and not by the Income-tax Act: what the Chapter contains, when it commenced, and the two different dates on which the two levies stopped

A notice has come in demanding equalisation levy, and I cannot find the levy anywhere in the Income-tax Act. Which statute is it actually in, what machinery governs assessment and appeal, and has it not been abolished?

A notice has come in demanding equalisation levy, and I cannot find the levy anywhere in the Income-tax Act. Which statute is it actually in, what machinery governs assessment and appeal, and has it not been abolished?

The equalisation levy is not in the Income-tax Act, 1961 at all. It is charged by Chapter VIII of the Finance Act, 2016 (Act 28 of 2016), which is a self-contained code running from section 163 to section 180 with its own extent and commencement provision, its own definitions, two charging sections, its own collection, statement, assessment, rectification, interest, penalty and appeal provisions, its own rule-making power and its own removal-of-difficulties power. Chapter VIII came into force on 1 June 2016, that date having been appointed by Notification No. S.O. 1904(E) dated 27 May 2016 issued under sub-section (2) of section 163, and the Equalisation levy Rules, 2016 were notified the same day by S.O. 1905(E) under sub-section (3) of section 179. Both levies have since been switched off, on DIFFERENT dates: the two per cent levy on e-commerce supply or services does not apply to consideration received or receivable by an e-commerce operator on or after 1 August 2024 (section 165A(4)), and the six per cent levy on specified services does not apply to consideration for specified service received or receivable on or after 1 April 2025 (section 165(3)).

Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2016-06-01, reported as Commencement established from the Lok Sabha record 'Papers Laid on the Table of the House by Ministers/Members', 5 August 2016, which records Notification No. S.O. 1904(E) published in the Gazette of India dated 27 May 2016 under sub-section (2) of section 163 of the Finance Act, 2016, and the Equalisation levy Rules, 2016 published by Notification No. S.O. 1905(E) of the same date under sub-section (3) of section 179. Structure of the Chapter taken from section 153 of the Finance Act, 2020 and section 171 of the Finance Act, 2021. Text of section 165A and section 166A taken from incometaxindia.gov.in/w/section-165a and /w/section-166a, both stamped Year: 2016, Act: Finance Acts; the marginal heading of every Chapter VIII provision taken from the arrangement of clauses of the Finance Bill, 2016, at indiabudget.gov.in/budget2016-2017/ub2016-17/fb/bill.pdf, where the Chapter is clauses 160 to 177 and the numbering moves up by three on enactment. It bears on section 163, section 163(2), section 163(3), section 164, section 165, section 165A, section 166, section 166A, section 167, section 168, section 169, section 170, section 171, section 172, section 173, section 174, section 175, section 178, section 179, section 180, section 10(50), section 40(a)(ib) of the Income Tax Act 1961, in How Tax Law Is Read and Assessment & Scrutiny matters.

Still good law. The Chapter is on the statute book and continues to govern periods before its two cut-off dates; it is the CHARGE, not the Chapter, that has been ended, and it has been ended prospectively by words written into the charging sections. What I could not verify: I did not read the text of sections 163, 164 and 166 to 180 and cannot confirm whether any of them has been amended since the Finance Act 2021 amendments described here, and I could not locate a departmental page carrying them. The marginal heading of section 178 is 'Application of certain provisions of Income-tax Act', taken from the arrangement of clauses of the Finance Bill 2016, but the LIST of provisions it applies is NOT stated in this entry, because I could not read the section's own words; a practitioner must read it before relying on any Income-tax Act provision in a levy proceeding. I did not check whether the Income-tax Act, 2025 re-enacts or repeals anything in Chapter VIII.

Why it matters

Three practical consequences follow, and each of them decides how a file is run. First, nothing in the Income-tax Act governs the levy's procedure. There is no section 143(3), no section 246A, no section 154 for it; the equivalents are inside Chapter VIII itself, and an objection or appeal filed under an Income-tax Act provision is filed under the wrong statute. Section 178 of the Finance Act 2016 applies a named list of Income-tax Act provisions to the levy, and that list was itself widened by the Finance Act 2020 (which substituted the words 'sections 119, 120' for 'sections 120'), so which Income-tax Act machinery reaches the levy is a question of reading section 178 and nothing else. Second, abolition does not close a file. The levies are switched off prospectively by cut-off dates written into the charging sections themselves; consideration received before those dates remains chargeable, and the assessment, interest, penalty and appeal machinery in Chapter VIII continues to operate on it. A practitioner in 2026 is still handling live equalisation levy assessments and appeals for financial years 2016-17 to 2024-25. Third, the two dates are different and it is a common error to run them together. Between 1 August 2024 and 31 March 2025 the two per cent e-commerce levy had gone but the six per cent levy on online advertisement was still charged. Getting that wrong in a reply produces a demand for a period that was never chargeable, or a concession for a period that was.

Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.

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