Finance Minister has proposed Equalisation Levy (EL) through Finance Bill, 2016, Chapter VIII.
E-commerce companies like Face Book, Google, etc. are growing very fast, earning substantial revenues and some of them are avoiding Income-tax in the Country of Source (COS) as well as Country of Residence (COR). E-commerce business is growing at the fastest rate globally and no Government in the world can allow this business to go tax free.
It is now admitted by OECD and other concerned authorities that under the present rules of international taxation, E-commerce companies can escape taxation. The main reason is that under the existing rules of international taxation, COS can tax a non-resident providing E-commerce services only if the non-resident has a permanent establishment (PE) in the COS. E-commerce companies do not need PE in any COS. They can set up the companies in tax havens and avoid COR tax also. For the last few years, there was strong public criticism – in Britain and other European countries - of these companies escaping taxation. In the light of the American and European financial crisis, G20 countries asked OECD to come out with recommendations for necessary modifications in the existing rules so that E-commerce companies also can be taxed.