CBDT issues new guidelines to streamline digital economy tax


The Central Board of Direct Taxes (CBDT) has issued norms for processing returns filed by digital economy firms that are liable to equalization levy, streamlining the administration of India’s digital economy tax.

The Centralized Processing of Equalization Levy Statement Scheme, 2023, which is effective from 07 Feb, 2023, sets the modalities for processing the returns filed by these entities.

The equalization levy was introduced in 2016 on online advertisements and later expanded to cover the sale of goods and provision of services through e-platforms.

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While online advertising services rendered by offshore entities are taxed at 6%, e-commerce supplies by non-resident firms are taxed at 2%.

Experts said that the scheme was long awaited as there was no procedure for processing of equalization levy statements so far, which had created some uncertainty, especially regarding refund claims made.

As per this scheme, the Centralised Processing Centre (CPC) of the Income Tax department which currently processes income-tax returns will also process equalization levy statements electronically and all communication should be on email or on the Income-tax portal.

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The consistent, uniform, rule-driven manner in which the CPC processes income tax returns, is expected to be replicated for equalization levy statements. This would keep the taxpayer informed by providing processing status updates on a real-time basis through email, text message and through the income-tax department website.

The scheme also provides for adjustment of refund with demand due for other years. We now hope to see the equalization levy statements to be processed and refunds claimed in the statements to be released.

The statement on equalisation levy is to be furnished by businesses by 30 June after the end of a financial year.

The centralized scheme aims to put more clarity in the procedural mechanism of the levy since revenue to government from this source is likely to be on the increase, said Amit Maheshwari, tax partner, AKM Global, a tax and consulting firm.

The rules also say that in case of a revised equalisation levy statement, no further action will be taken on the original statement, if it has not already been processed, explained Maheshwari.

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