Section 168 of the Finance Act, 2016 (Chapter VIII) governs the processing of statements furnished under Section 167 for the Equalisation Levy in India. This section outlines the procedure for processing the statements filed in Form 1 by persons responsible for deducting or paying the Equalisation Levy, applicable to both the 6% levy on specified services (under Section 165) and the 2% levy on e-commerce supply or services (under Section 165A). Below is a concise and comprehensive explanation of the provisions under Section 168.
Section 168: Processing of Statement
1. Objective:
- Section 168 provides for the processing of the Equalisation Levy statement (Form 1) to verify the accuracy of the levy deducted or paid, ensure compliance, and compute any additional levy, interest, or refund due.
2. Who Processes the Statement:
- The Assessing Officer or any other authority designated under the Income Tax Department is responsible for processing the statement filed under Section 167.
- The processing is typically done electronically through the Income Tax Department’s systems.
3. Scope of Processing:
- The statement filed in Form 1 (by payers for the 6% levy or non-resident e-commerce operators for the 2% levy) is examined to:
- Verify the amount of consideration reported for specified services or e-commerce supply/services.
- Confirm the Equalisation Levy deducted (under Section 165) or paid (under Section 165A).
- Check the timeliness and accuracy of deposits made to the Central Government.
- Identify any discrepancies or errors in the reported transactions or levy calculations.
4. Adjustments During Processing:
- The Assessing Officer may make adjustments to the statement to:
- Correct arithmetical errors in the computation of the levy.
- Rectify incorrect claims or discrepancies, such as under-reporting of consideration or non-deduction/non-payment of the levy.
- Compute any additional levy payable due to errors or omissions.
- Calculate interest under Section 170 (at 1% per month or part thereof) for delayed deposit or non-payment of the levy.
- Determine any refund due if excess levy has been deposited.
5. Intimation to the Assessee:
- After processing, an intimation is issued to the person who filed the statement (payer or e-commerce operator) specifying:
- The amount of levy payable (if any) after adjustments.
- Interest payable for delayed or non-payment.
- Any refund due, if applicable.
- The intimation is issued within one year from the end of the financial year in which the statement was filed (e.g., for a statement filed by June 30, 2025, for FY 2024–25, intimation must be issued by March 31, 2027).
6. Demand or Refund:
- If additional levy or interest is due, a demand notice is issued, requiring payment within the specified time (usually 30 days).
- If a refund is due, it is processed as per the provisions, subject to verification and approval by the Assessing Officer.
- The demand or refund is adjusted against any outstanding liabilities or overpayments, if applicable.
7. Consequences of Non-Compliance:
- If discrepancies are found (e.g., failure to deduct/pay the levy or under-reporting), the Assessing Officer may:
- Issue a notice of demand for the shortfall in levy or interest.
- Impose penalties under Section 171:
- ₹100 per day for failure to furnish the statement, up to the amount of levy deductible/payable.
- ₹25,000 for furnishing inaccurate particulars in the statement.
- For the 6% levy, failure to deduct or deposit may lead to disallowance of expenditure under the Income Tax Act, 1961.
8. Rectification of Errors:
- If the person filing the statement identifies an error after submission, they can file a revised statement to correct it, subject to the provisions of the Equalisation Levy Rules, 2016.
- The Assessing Officer may also allow rectification of errors during processing, either on their own motion or based on an application by the assessee.
Key Points to Note:
- Electronic Processing: The processing of Form 1 is typically automated through the Income Tax Department’s e-filing portal, ensuring efficiency and accuracy.
- Time-Bound: The one-year timeline for issuing the intimation ensures timely resolution of discrepancies or refunds.
- Separate for Each Levy:
- For the 6% levy (Section 165), the payer (Indian resident or non-resident with a PE) files and is subject to processing.
- For the 2% levy (Section 165A), the non-resident e-commerce operator files and is subject to processing.
- Objective: The processing mechanism ensures compliance with Equalisation Levy obligations, prevents tax evasion in digital transactions, and facilitates recovery of any shortfall.
Practical Implications:
- Payers (e.g., businesses paying for online ads to Google or Facebook) must ensure accurate reporting in Form 1 of all payments exceeding ₹1 lakh in a financial year and the 6% levy deducted/deposited.
- E-commerce operators (e.g., Amazon, eBay) must report transactions exceeding ₹2 crore in a financial year and the 2% levy paid, ensuring compliance to avoid penalties or demands.
- Any mismatch between reported transactions and actual payments/deposits may trigger scrutiny during processing, leading to demands or penalties.
