With reference to India rsquo s decision to levy an equalization tax of 6 on online advertisement se...........

Economic Affairs Tax System

With reference to India’s decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct?

1. It is introduced as a part of the Income Tax Act.

2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.

Select the correct answer using the code given below:

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UPSC CSP Previous Year Paper (2018)

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1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Equalisation levy was introduced in 2016 on business transaction for online marketing in which any Indian pays a sum of more than Rs.1 lakh to non-residents entities such Google and Facebook etc.

As the levy was not introduced as part of the Income Tax Act but as a separate legislation under the Finance Bill, global firms that offer such services in India cannot claim a tax credit in their home country under the double taxation avoidance agreements