Avalara > Blog > Goods and Services Tax > Delhi HC issues notice to Govt. over Equalization Levy on MasterCard ‘s subsidiary

Delhi HC issues notice to Govt. over Equalization Levy on MasterCard ‘s subsidiary

  • Oct 19, 2020 | Divita S Gupta

The High Court of Delhi has issued a notice to the Centre and to the Income Tax department after MasterCard Asia Pacific PTE approached the High Court asking for a stay on the payment of 2% of the equalisation levy on digital transactions claiming that it would lead to double taxation. MasterCard Asia Pacific PTE is a Singapore based subsidiary of global company MasterCard. 

The Equalisation levy which was implemented in 2016 has expanded its purview to include e-commerce players for supplying goods and services starting this year. This is applicable to companies who do not have a permanent establishment in India. MasterCard Asia Pacific PTE claims that in a 2018 AAR ruling it was held that a company has various kinds of permanent establishments in India such as fixed place PE, service PE, etc. The matter is sub-judice at present. 

As per Section 165A (2) (i) of the Income Tax Act, the levy is not payable when a permanent establishment exists. If Mastercard Asia Pacific does not have PE in India, it will have to pay an equalization levy but if it has PE then it will pay the normal tax. The company approached the High Court claiming that the imposition of the levy on the company should be put on hold until the principal issue of PE is decided by the court. Additionally, the company claimed that the tax is already being paid and as such equalization levy cannot be sought as it would lead to double taxation. The next hearing of this case is on August 18th 2020. 

Avalara helps businesses of all sizes get GST return filing, e-way bill generation and e-invoicing right with cloud-based GST compliance solutions in India. Goods and Services Tax (GST) rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.

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