Digital Tax War and Equalisation Levy

RECENT DEVELOPMENT

The Finance (No. 2) Act 2024 has dropped the provision of Equalisation Levy (EQL) of the year 2020 on e-commerce supply of services and goods. (Finance Act 2016, Chapter VIII has been suitably modified.) What we call equalisation levy is a part of Digital Taxation. Digital Taxation has been the subject of deep discussions, since 1997, and a global tax war, since 2013. In this tax war, the US Government has been on one side, China has been neutral, and the rest of the world has been on the other side. The USA has been insisting that there should be no digital taxation on non-residents of a country; in other words, digital commerce income should be taxed only by the Country of Residence (COR). India resisted this demand from the USA, but finally, with the Finance (No. 2) Act, 2024 India has succumbed to US pressures. Even before the Indian withdrawal, U.K., France, etc. have deleted their unilateral digital tax laws.

With the withdrawal of EQL 2020, in the Global Digital Tax War, USA has emerged as ‘The Winner’.... for the time being. Let us see how the situation develops. 

The Global Digital Tax War and earlier, Digital Tax discussions have engaged many tax commissioners as well as professionals and a huge amount of intellectual work has been done. Since 2013, there was a huge d