Under Action 1 of the Organisation for Economic Co-operation and Development's (OECD's) base erosion and profit shifting (BEPS) Action Plan, the OECD had considered, inter alia, an equalization levy (i.e., a tax to equalize the tax burden on remote and domestic suppliers of similar goods and services) as one option to tax digital transactions. While the final Action 1 report released in October 2015 did not recommend introducing such a levy as an internationally agreed standard at this stage, it did state that countries could introduce one in their domestic laws as an additional safeguard against BEPS, provided they respect existing treaty obligations, or include them in their bilateral tax treaties. In the Indian fiscal budget presented on February 29, India's Finance Minister proposed inserting a new chapter titled Equalization Levy in the Finance Bill 2016 to provide for an equalization levy of 6% of the amount of consideration for specified services received or receivable by a nonresident not having a permanent establishment (PE) in India, from a resident in India who carries out business or profession, or from a nonresident having a PE in India.

A Tax Alert prepared by Ernst & Young's Indian Tax Desk in New York, and attached below, provides additional details.

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