The equalisation levy was India\'s response to the challenge of taxing digital economy transactions involving non-resident service providers with no permanent establishment in India. The levy operated in two phases: the 6% equalisation levy on digital advertising services (Finance Act 2016, Chapter VIII) and the 2% equalisation levy on e-commerce supply or services (Finance Act 2020).
The 2% equalisation levy on e-commerce operators was abolished with effect from 1 August 2024 by the Finance (No. 2) Act 2024. The 6% equalisation levy on digital advertising services was subsequently abolished with effect from 1 April 2025. The abolition of both legs aligns with India\'s commitment under the OECD/G20 Inclusive Framework on BEPS to withdraw unilateral digital-services taxes upon implementation of the Pillar One solution (Amount A). Both levies remain applicable for the periods they were in force, and residual compliance, audit and dispute issues continue.
AMLEGALS advises non-resident companies and Indian payers on residual equalisation levy compliance — outstanding returns, assessments for prior periods, penalty proceedings and dispute resolution. The practice also advises on the transition to the OECD Pillar One framework and its implications for cross-border digital transactions.
Advising on outstanding equalisation levy returns and payments for periods when the levy was in force.
Defending against equalisation levy assessments and penalty proceedings for prior periods.
Advising on refund claims for overpaid or wrongly paid equalisation levy.
Advising on the interaction between the equalisation levy and bilateral tax treaties.
Advising on the OECD Pillar One Amount A framework and its implications for India's taxation of digital economy transactions.
Advising Indian payers on the withholding and deposit obligations for transactions that fell within the levy period.
Yes. The 2% equalisation levy on e-commerce supply or services (introduced by Finance Act 2020) was abolished with effect from 1 August 2024. The 6% equalisation levy on digital advertising services (introduced by Finance Act 2016) was abolished with effect from 1 April 2025. Both abolitions were enacted by the Finance (No. 2) Act 2024.
The Finance Act 2020 introduced a 2% equalisation levy on the amount of consideration received by an e-commerce operator (non-resident) from e-commerce supply or services made or provided or facilitated to: (a) a person resident in India, (b) a non-resident in specified circumstances, or (c) a person who buys goods or services using an IP address located in India. It applied to operators with annual revenue from India exceeding Rs 2 crore.
The Finance Act 2016 introduced a 6% equalisation levy on consideration paid by a resident or a non-resident having a permanent establishment in India to a non-resident for specified digital advertising services — online advertising, provision of digital advertising space and any other service notified by the Central Government. It applied where the aggregate consideration exceeded Rs 1 lakh in a financial year.
Yes. For the periods during which the equalisation levy was in force, all compliance obligations continue — filing of equalisation levy returns (Form 1 for the 6% levy), payment of outstanding levy, response to assessments and audit queries, and defence of penalty proceedings. The statute of limitations for assessment and penalty varies by the specific provision.
The abolition aligns with India's commitment under the OECD/G20 Inclusive Framework on BEPS to withdraw unilateral digital-services taxes (including the equalisation levy) upon implementation of the Pillar One solution (Amount A), which reallocates taxing rights over a portion of multinational profits to market jurisdictions. The withdrawal was a key deliverable in the global agreement.
No. No engagement is treated as accepted until conflicts, scope and terms are confirmed in writing.
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