Our Associate Saloni Singhal writes on the topic “Digital Taxation- Evolution of Equalisation Levy”.
Over the decade, use of technology has drastically changed the global business structure by creating immense transformations in the way companies globally conduct their businesses. Technology has expanded the outreach and connectivity of the businesses and with the use of digital space, companies located outside India are able to run their businesses in digital domain itself without existence of any physical presence in India i.e. without facing any location barriers in India. Due to this, such foreign companies were generating huge revenues from India without paying any taxes therein due to non-existence of their physical presence in the country. Accordingly, along with the opportunities for expansion of the economy, such digital business spaces were creating new tax challenges for the economy. In order to address such tax challenges, concept of “Equalisation Levy” was introduced by the Government back in the year 2016 vide Finance Act, 2016 (“FA, 2016” for short) with the intention of taxing certain digital transactions on recommendation made by Organization for Economic Co-operation and Development (OECD) in Base Erosion and Profit Shifting project (BEPS).