Digital Tax not just a click away



Session Structure

Digital Economy & its Challenges

Equalization Levy

TDS Provisions

Today’s Scenario

Significant Economic Presence

GST Provisions

What is a Digital Economy?
  • The economy that is based on digital computing technologies
  • Conducting business through markets based on internet & WWW

Hyperconnectivity between people, organizations and machines


Some Statistics – Still behind China
Before COVIDAfter covid
  • 577 Million Internet Users (36.8% of Population)
  • 370 Million Social Media Users (11.1% of Population)
  • 624 Million Internet Users (45% of Population)
  • 448 Million Social Media Users (32.3% of Population)
Change due to COVID-19
01) Social Media Websites
02) Work from Home

Target Advertising

Computing Power

“Physically Absent but Fiscally Present”

1 Second = 127 Devices

The Challenges
In the absence of any physical presence, there is a lack of nexus between the income recipient and the ultimate parent company
How Much?
Categorization of income from transactions involving data for tax purposes and how to determine the quantum of income?
Some other points relating to EL 2.0

Payment, interest & penalty provisions

FA 2021 Clarifications

  • Does not include consideration is taxable as royalty or FTS
  • “Online sale of goods/provision of services” -acceptance of offer for sale, placing a PO
  • Income of such e-com. operator is exempt under S.10(5) from 1st April 2020
EL chargeable irrespective of whether goods/services are owned/provided/facilitated
Disallowance under S.40(a(ia)
Need to furnish a statement in FORM 1 within 30th June of next year
Case Studies

  1. Apple Inc. running iphone ads to target Indian users on Alibaba platform and pays INR 3 Crs – Yes, EL
  2. Alibaba buys data from Facebook India for INR 1 Cr and sells it to Apple Inc. for INR 6 Crs – Yes, EL on INR 6 Crs
  3. Amazon Music providing services to Indian customers – No, EL
  4. Only order placed online for goods through platform, rest all functions done offline – EL only on the consideration from online service
  5. NR e-com. sells good to a resident for INR 100 which is listed on its platform by another resident from whom commission of INR 30 is received – EL on INR 130
Challenges to EL 1.0 & 2.0

FY 19-20 – INR 1136.5 Crs
FY 2020-21 – INR 1492.7 Crs

TDS under 194-O – with effect from 1st Oct 2020


When the sale of goods/provision of services by an e-com. participant (resident) is facilitated through any digital / e-facility or any platform of an e-com. operator (resident/NR)


At the time of credit or payment to participant whichever is earlier


@ 1% (0.75% from Oct’20 to Mar’21) of the gross amount of such sales or services or both

No Deduction?

When such participant is an individual/HUF + gross amount <= INR 5 Lakhs + PAN/Aadhaar furnished


More points for clarification
  1. Payments made directly to participants shall be deemed to be amount credited / paid by operator – customers directly paying to Ola / Swiggy
  2. No TDS under any section if the transaction attracts 194-O – Cleartax making payment to CA’s (no 194J)
  3. If no PAN furnished, then rate shall be 5% under S. 206AA
  4. The participant shall be a resident


Case Study
GST Provisions
  • Liability to pay GST under RCM by operator under S.9(5) of CGST Act, 2017
  • Taxability and POS Rules for OIDARS providers under S.14 of IGST Act, 2017
  • Tax to be collected (TCS) by operator on supplies through it before making payments to participants under S.52 of CGST Act, 2017
RCM Liability u/s 9(5)
TCS u/s 52
Some points relating to TCS
  1. The operator should not be an agent
  2. TCS shall be on the “net value” of “taxable supplies””
  3. The e-com. operator should get the consideration from the end-customer
  4. Sale of goods/services from own website – not attracting TCS
  5. Applies to NR e-com. operators also
  6. Credit available to the participants / suppliers
OIDARS – S.14 of IGST ACT, 2017

Services whose delivery is mediated by IT where there is automatic supply | Minimal human interference | impossible without IT


Includes:Excludes: POS
  • Ads
  • Cloud services
  • e-books
  • online gaming
  • Mailed PDFs
  • CA/lawyer services through mail
  • Supply of goods
  • Transfer of movies


location of recipient (deeming provisions)

Case Study – OIDARS
Significant Economic Presence


0102 03

S.9 – Income deemed to accrue or arise in India

Business Connection in India under Expl.2

SEP – FA 2018 inserted Expl. 2A (Deemed BC)

2 categories for SEP
Category 01Category  02

Transactions in relation to the provision of goods/services/property including download of data/software by an NR in India

Soliciting of business activities/interaction with Indian users through digital means

FA 2018 – no limits were prescribed (less relevant)


CBDT notification dated 3rd May 2021 – limits

Today’s Scenario

Explained : US investigation into digital services tax, and what is the case against India?

What us global minimum tax and what will it mean?

Amazon, Facebook Lobby Groups urge Digital-Tax End, OECD Deal


Relevance of Internal Audit

Need for surprise audits

As tax authorities demand more data

Whether FORM-1 of EL has been filed on time?
Indicate the high & low risks that the Boards and Senior Executives should be aware of

Checks in place to find if e.comm operators are meeting compliance requirements