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CA Final · Direct Tax Laws & International Taxation · Latest Developments in International Taxation

Case: Bluepeak Inc, a foreign company with no presence in India, sells software subscriptions through its website to Indian users and earns Rs 5 crore from India in the previous year. Which statement correctly describes the Indian tax position as per the law currently applicable (post-2024 amendments) regarding equalisation levy?

Equalisation levy is not leviable because both the 6% levy on online advertisement and the 2% levy on e-commerce supply have been withdrawn for the relevant periods. Any Indian taxation would instead be tested under income-tax provisions like significant economic presence, subject to treaty relief.

  1. AThe 6% equalisation levy on online advertisement services applies to such sales
  2. BThe 2% equalisation levy on e-commerce supply applies to such sales
  3. CEqualisation levy is not leviable on this, since the 6% and 2% levies stand withdrawn for the relevant periods; income taxability depends on other provisions such as significant economic presenceCorrect
  4. DEqualisation levy at 10% applies and is deductible in the hands of the Indian user

Explanation

The 6% levy on online advertising was abolished from 1 April 2025, and the 2% levy on e-commerce supply was withdrawn from 1 August 2024. Therefore neither levy applies to this receipt for the relevant period. Taxability, if any, falls to be tested under income-tax provisions such as business connection and significant economic presence, subject to treaty.

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