The Government of India expanded the scope of ‘Equalization Levy’ – a tax on cross-border digital transactions – to include all types of e-commerce supplies and services.
This year, as part of the revised annual finance budget for India, the Government of India expanded the scope of ‘Equalization Levy’ – a tax on cross-border digital transactions – to include all types of e-commerce supplies and services. This aligns with key trends in recent times that have been set by countries around the world towards taxing corporations and institutions in a digital age, a direct consequence of OECD’s guidelines set forth on this topic.
A detailed analysis of this levy and key implications from a definition, cost and compliance perspective have been detailed out by Sannam S4 in our recent publication here. Essentially, from April 2020, a 2% charge is applicable for all online supplies and services exported into the country or delivered in other specified manners.
This levy directly impacts all online courses planned or delivered by global Universities to students, executives or institutions in India. Furthermore, as many universities plan to create alternative models of education as an immediate response to the COVID-19 crises, factoring this levy into program strategies becomes even more important.
As a market leader in the international higher-education sector in India, Sannam S4 has been actively evaluating the impact of this levy on our partners’ current programs and future plans. After collating feedback and questions from our partners, Sannam S4 has made a submission to the Ministry of Finance, seeking clarity on the recent introduction and expansion of Equalisation Levy (“EL”) to all e-commerce services. The following queries have been raised with the Ministry:
- Clarification and relaxation on implementation of EL case where online courses are a temporary measure in the current COVID-19 scenario: In light of COVID-19 and the travel restrictions placed, many institutions have transitioned all “on-campus” programmes for the 2019-2020 academic year online to ensure that students continue their education as planned. We have requested clarity on whether the levy will be also be applied to such instances of online education.
- Clarification in the case where only part of the total course is online, while the rest is to be conducted through in-person classes in the current COVID-19 scenario: On behalf of foreign institutions we also have requested clarity on whether the levy is applied to blended modes of delivery which include both online and on-campus teaching. Many institutions are taking this blended learning approach under the current situation as they are keen to enable students to arrive on campus (at respective destination countries) and benefit from the international experience as well as the post study work opportunities once the travel restrictions are lifted and classes can be held on campus later in the year.
- Articulating the registration, calculation and compliance requirements of levy for foreign universities: As the EL has been levied on the foreign organisations/businesses (covered within the definition of E-commerce operator) – on behalf of our institutional partners we have also requested a detailed clarification on how foreign universities need to register, calculate, comply and pay for the tax as this is an urgent ask for institutions to ensure they meet all compliance requirements prescribed under the EL levy. Most institutions do not have any legal presence or operations in India and are keen to understand the requirements for ensuring compliance under local law.
We are grateful to be able to present our questions on the equalisation levy, and reaffirm our continuous support and assistance to the Indian government in its efforts to ensure that EL is duly complied with by international organizations.
Following this submission, Sannam S4 will continue to engage with the relevant stakeholders to discuss how we can support our partners as well as the Government of India to ensure the successful implementation of this levy.