A Committee constituted by the Central Board of Direct Taxes (CBDT) has recommended for the levy of tax on most digital services. The Committee constituted to examine taxation of E-Commerce, has recommended that Equalization Levy may be imposed at a rate of six to eight per cent, on any consideration of more than one lakh rupees received by a non-resident from a resident of India or from a permanent establishment in India for certain specified digital services, including online advertising, any services for online advertising and digital advertising space.

The Finance Bill, 2016 proposes equalization levy at the rate of 6% of the amount of consideration for specified services received or receivable by a non-resident, from a resident in India who carries out business or profession, or from a non-resident having a permanent establishment in India, where the aggregate amount of consideration received in a year exceeds one lakh rupees. The proposed levy will have no direct impact on consumers as it is applicable only to business to business transaction.

This was stated by Shri Jayant Sinha, Minister of State in the Ministry of Finance in written reply to a question in Lok Sabha today.

Equalization levy on digital services imposes tax on payments to non-residents for specified online advertising services. The Finance Bill, 2016 proposes an Equalization Levy at six per cent on consideration for specified digital services received or receivable by a non-resident from an Indian resident carrying on business or from a non-resident with a permanent establishment in India where the aggregate annual consideration exceeds the statutory threshold; the levy targets payments for services such as online advertising and is structured as a business-to-business tax.