Equalisation levy of 6 per cent on services pertaining to cross border digital transactions will come into effect from June 1.
At present, equalisation levy is leviable only on payments relating to online advertisements, said C A Gupta, Partner, Deloitte Haskins and Sells.
The Central Board of Direct Taxes (CBDT) has notified the rules for equalisation levy and said the tax will come into force from June 1.
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In order to tap tax on income accruing to foreign e-commerce companies from India, the Finance Act 2016 said a person making payment to a non-resident (who does not have a permanent establishment) exceeding in aggregate Rs 1 lakh in a year will withhold tax at 6 per cent of gross amount paid, as equalisation levy.
The levy will only apply to business to business transactions.
As per the BEPS action plan, OECD has recommended to impose a final withholding tax on certain payments for digital goods or services provided by a foreign e-commerce provider or imposition of a equalisation levy on consideration for certain digital transactions.
"Considering that all the operational aspects have been addressed, once the provision for equalisation levy is brought in force, the payers would require to be mindful of the compliances with equalisation levy in relation to payment towards online advertisements," said Gupta.
Last month, Internet and Mobile Association of India (IAMAI) had said that levy on online advertisement revenue of foreign companies would "severely raise the cost of doing business" for Indian tech startups.
The Committee on Taxation of E-commerce set up by the CBDT in its report submitted to the government in February had suggested introduction of equalisation levy between 6-8 per cent on amount paid to non-resident by an Indian resident for specified digital services.
The specified services would include online advertising or any services, rights or use of software for online advertising, including advertising on radio and television, designing, hosting or maintenance of websites, digital space for website, e-mails, blogs, facility for online sale of goods or services or collecting online payments.
In the association's meeting, the issue of cadre
mismanagement, which has resulted in delay in promotions at various supervisory levels despite large number of vacancies, the officers being overburdened as the officers are holding multiple charges due to vacancies, was discussed.
"The disparity in empanelment vis-a-vis other services, particularly at the level of Joint Secretary and above and disparities in pay structure i.E. Increments on promotion, was brought to the notice of the Finance Minister," it said in the release.
The association submitted a representation to the Finance Minister saying "serious manpower shortages at supervisory levels may be addressed urgently and that promotions at all levels should be carried out without any further delay".
"Empanelment at Joint Secretary level and above should be expedited and there should be parity with IAS. Parity in pay should be granted and two additional increments on promotion to Senior Time Scale, Junior Time Grade and Selection Grade should also be given to IRS officers.
"Considering the circumstances surrounding the issues at Mumbai, the punitive transfers affected and disciplinary action initiated against officers should be reversed," it said.
The association's delegation comprised Akhilesh Ranjan(President), P K Gupta (Vice President) and Anchal Khandelwal (Joint Secretary).
