Taxability Due to Significant Economic Presence (Sep) in India

August 24, 2021
  • SEP covers the below-mentioned transactions
    • E-com transaction,
    • E-books, music, video streaming,
    • Online app/software purchase,
    • Online Gaming Service
    • Troubleshooting service
    • Subscription service
  • The Threshold limit recently provided by CBDT for SEP Tax is
    • Aggregate payment for transactions with a person in India exceeds INR 2 crore in a year
    • NR interacts with 3.00 lacs or more users in India
  • Now let’s understand the implication of SEP tax. Currently, DTAA does not cover SEP tax, it only covers tax on physical presence
  • Even BEPS action plan left individual Countries to determine digital tax, so MLI does not cover SEP tax
  • As a result, until MLI gets upgraded, even if the SEP tax is levied under domestic law, Treaty will safeguard Non-Resident business
  • In other words, SEP tax shall only apply to non-resident businesses from countries where India does not have DTAA
  • We also are aware of fact that Sec 10(50) exempt SEP tax if Equalisation Levy is charged on transactions