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Paper on Equalisation Levy - Preliminaries



Paper on Equalisation Levy - Preliminaries


CA Rashmin Chandulal Sanghvi

Date: 12th July 2016

I.1 This paper is divided into following parts:

I.2 Notes:

(i) We have written several articles on E-Commerce Taxation. After long debates, India has come out with Equalisation Levy as one important step towards introducing E-Commerce Taxation.

The aticle on Equalisation Levy –

a. Explains the tax law on Equalisation Levy.

b. Why it was needed – weaknesses in the existing system of International Taxation; and

c. Suggestions on way forward.

(ii) All the views expressed in this paper are my personal academic views. E-commerce Committee and Government of India may or may not agree with these views.

(iii) This paper discusses concepts and interpretations. Emphasis is on: “Why this tax?”. Analysing a concept needs more elaboration than interpreting a section.

(iv) I have received several queries & criticisms on Equalisation Levy. I have tried to deal with almost all queries & criticisms. Hence the paper has several parts & is long.

(v) Some of the issues have several aspects. In some cases, these aspects have been discussed in this paper at several places.

I.3 Short Forms:

For the sake of brevity, I have developed some short forms & used in this paper. These are marked (*). Kindly see them below.

BEPS : Base Erosion & Profit Shifting

COM : Country of Market

COR : Country of Residence

COS : Country of Source/Payment

*DTA : Double Tax Avoidance Agreement

*EL : Equalisation Levy

* EL TDS : Deduction of EL at Source

FTS : Fees for Technical Services

G20 : Group of 20 nations formed in the aftermath of US & Europe - Economic crises that started in the year 2008.

*IR : Indian Resident

*IRP : Indian Resident Payer

ITA : Income-tax Act of India.

NR : Non-Resident

OECD : Organisation for Economic Co-operation & Development

PE : Permanent Establishment

*R : Resident

RBI : Reserve Bank of India

SEP : Significant Economic presence.

TDS : Tax Deduction at Source (Income-tax)

TFDE : Task Force on Digital Economy

I.4 Relevant Publications:

BEPS ACTION ONE Report available on:


Indian E-Commerce Committee Report dated March 21, 2016 available on:


I.5 Some Philosophy:

5.1 Truth:

Even if you are in the minority of one,

The truth is The Truth.

5.2 Truth must be told:

Publicly – Let all who care, listen.

Clearly – Let all who want, understand it.

Humbly – That is the way of decent people.

In substance – Core truth must be told without any hesitation & ambiguity.

5.3 A person in search of Truth will get Truth. A person who is not in search of truth will get anything but Truth.