The Society of Indian Automobile Manufacturers (SIAM) has sought clarification on the scope of the 2 per cent equalisation levy, intended to impose a tax on payments made to foreign beneficiaries for digital services provided.
However, SIAM said the amendments proposed under the Finance Bill 2021 may inadvertently introduce interpretation issues to cover many overseas manufacturing companies having
subsidiary manufacturing entities in India, particularly in the automotive sector, under foreign collaborations or licensing arrangements.
According to SIAM, the current definitions of "e-commerce operator", "online sale of goods" and "online provision of services" in the Finance Act, used for the purpose of equalisation levy, have created a grey area, specifically for cases where there is partial online communication of placing purchase orders, through digital Platforms, followed by the physical delivery of goods and payments made via authorised banking channels.
"Digitalisation is used in the auto sector as a matter of administrative convenience and for increasing efficiencies - not for taking a final commercial decision on sale and purchase," SIAM Director General Rajesh Menon said.
"Actual commercial decisions are offline and done within the overall master agreement in the form of a licence agreement or JV agreement, etc. Therefore, internal digital system for supply-chain management should not fall within the provisions of equalisation levy."