New Guidelines to Keep Pace with Digital Economy Tax

The Central Board of Indirect Taxes recently issued its new guidelines for simplifying the way returns are processed and the applicable tax implications of the entities operating in the digital economy. It was difficult to keep pace with the traditional tax system for charging these entities on various grounds and also finding the taxable presence of these entities.

Through the Notification No. 03/2023/F.No.370142/1/2023-TPL, CBDT provided rules and regulations in respect of the assessment of Statement of Equalization Levy, imposed on certain assessees and e-commerce operators through Equalization Levy Rules, 2016. The equalization levy was charged to entities engaged in e-business to charge a levy on their advertisement and on using multiple e-services for selling or promoting their goods and services on different e-service platforms.

The Equalization rules were much awaited as there were no standard procedures and regulations provided concerning the filing of the Equalization levy and statements provided in the Equalization Levy, Rules 2016. As implemented from 7th February 2023, all assessees and e-commerce operators falling in charge of the Equalization levy shall be required to furnish a statement with the provided due dates prescribed by CBDT.

It is said, that CBDT like processing the Income Tax Returns will now process the Equalization levy statements similarly, for which intimations and updates shall be provided to the assessee through email or text message.

Understanding the Implications of the Centralised Processing of Equalization Levy Statement Scheme, 2023 

Submissions and Processing of Equalization Levy Statement 

Prescribed under Section 167 of the Finance Act, 2016, every e-commerce operator or assessee shall be required to a statement of return to CBDT, a statement of return for the Equalization levy applicable on specified services or e-commerce supplies made during a financial year. The return Form -1 prescribed is to be filed in this concern before 30th June after the end of the financial year.

Once the return is submitted, it is processed for arithmetical errors and adjustments to be considered fit for further processing. The interest amount, the sum payable, and the amount of refund due shall be adjusted with reference to the clauses of Section 166(2), Section 166A, and Section 170 of the act.

On submission of the statement, no intimation or order is sent for one year from the end of the financial year, if any refund is due it shall be granted to him in pursuance of the clauses of the Scheme.

Regulations Stipulated for Equalization Levy Statement 

Within the specified Rule 5 of the Equalization Rules, 2016 following payment of the Equalization levy to the Central Government through Challan will be required to furnish this statement or a revised Equalization levy statement.

Under the scheme, a digital equalization levy statement shall also be filed if the assessee has received any notice with respect to any e-commerce supply or service provided in charge of the Equalization levy.

On receipt, the statement shall be processed by the Director General and shall be declared as valid or invalid on account of the information provided on the statement.

For amendment required in any intimation, under the Scheme, the operator or assessee shall have to apply for amendment within the next financial year from the closure of the applicable financial year.

For errors and their rectification, the statement shall be referred to an Assessing officer in the Jurisdiction of the assessee.

For any proceedings held with the department – no e-commerce operator or assessee shall be required for physical presence as all clarifications under the system will be done electronically.

The Centralised Processing of Equalization Levy Statement Scheme, 2023 is a significant move for e-commerce entities and assessee to keep pace with Equalization Levy as the digital economy tax. The simplification in the return filing and removal of complications from the Equalization levy through this scheme is a great way forward by the Government for making the tax on the digital economy fair and transparent.

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