The government has clarified several provisions concerning equalisation levy and expanded the definition of e-commerce companies in its Union Budget for 2021-22. The government now states parts of transactions corresponding to royalty payments and fees for technical services (FTS) would not attract a levy, but will instead be taxable under income tax. Finance Minister Nirmala Sitharaman, in her Budget speech on Monday, said that this was being done to "provide certainty" to companies. "In order to provide certainty, it is being expressly clarified that transaction taxable under income-tax are not liable for equalisation levy. Further, it is also proposed to clarify regarding applicability of equalisation levy on physical/offline supply of goods and services." — Nirmala Sitharaman, Finance Minister The equalisation levy is a direct tax that countries impose on income from digital services, specifically income accrued by foreign e-commerce companies. The levy has been a bone of contention in international commerce; only recently, the United States criticised India's equalisation levy regime as "discriminatory" against foreign companies. In India, the equalisation levy is at 2% of the amount received by an e-commerce operator. "It is seen that there is need for some clarification to correctly reflect the intention of various provisions concerning this levy," the government said in the memorandum to the Union Budget. As part of the Finance Bill, the government has expanded the definition of e-commerce activity and to whom the equalisation levy will be applied. The bill in total includes the following changes: Royalty fee or technical services…
