The income-tax department has introduced changes to the form used to pay equalisation levy, to include the option of paying up the new 2% levy on digital transactions conducted in India by foreign e-commerce companies.

The new levy was introduced in the Union Budget and was made effective from April 1, with the first instalment payment due on July 7.

The IT department has amended the challan ITNS 285 – which is used to pay the levy – through an online mechanism. The changes now include ‘e-commerce operator for e-commerce supply or services’ under type of deductor category, and permanent account number of PAN of the deductor or the e-commerce company has been sought.

Importantly, the modified challan provides for ‘Outside India’ option while seeking the address details of the payee, enabling foreign companies to key in details and make the payment due.

The move comes as government authorities stood their ground on implementation of the new levy, even as the United States has opened an investigation into evaluating whether the digital taxes imposed by India and nine other countries, discriminates against US-based companies.

The modification of the challan clearly indicates that the government has not heeded to representations from e-commerce companies’ and international business associations that had sought deferment of the levy by a year.

Experts said that the move has put additional burden on companies to get PAN and adhere to the rules within a very short period of time, even as they await detailed clarifications through FAQS from the government on components that would entail the application of the levy and if there are any exemptions from accounting, such as services or goods that are executed online but delivered offline.

“This has rather imposed a burdensome and challenging task for non-resident e-commerce players to apply for and obtain PAN within 1 business day in the midst of curbs, lockdown and pandemic affected business life and also organize the mode of payment through an Indian bank account or debit card issued by an Indian Bank,” said Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP.

Detailed FAQs will provide much needed clarity and time to taxpayers, to better understand their obligations, proceed with determining the appropriate amount of tax payable by them, and ensure due compliances.

However, the rushed move could cause substantial challenges in discharging first payment liability, in case interest, penalty and potential litigation for delayed payments are to be avoided, they added.