Understanding Equalization Levy for Online Services

Equalization levy is a tax that applies to certain payments made to foreign service providers. If your business pays more than Rs 1,00,000 to a foreign service provider for online services in a financial year, you may be required to withhold a 6% levy on that payment.

In your case, since you have already made a payment to a client for online advisory services without deducting the equalization levy, you might wonder if you can now ask the client to cover that 6% amount. Generally, the responsibility to deduct the levy lies with the payer, which means your business should have withheld that amount before making the payment.

Unfortunately, since the payment has already been made without the deduction, you may not be able to recover that 6% from the client. It's important to understand these rules before making payments to ensure compliance and avoid any potential penalties. Moving forward, make sure to assess any payments to foreign service providers and apply the equalization levy accordingly.