TO prevent avoidance of tax being practised by many global entities operating through internet and not having a physical presence of any PE in India, the Finance Act, 2018 had introduced the concept of 'Significant Economic Presence' (SEP) in the Income-tax Act, 1961 for taxation of non-residents in India by amplifying the scope of the definition of "business connection" through Explanation 2A to section 9(1)(i) of the Act. The definition of 'business connection', was clarified to provide that a non-resident's significant economic presence in India shall constitute "business connection" of the non-resident in India and the "significant economic presence" for this purpose shall mean-

(i) any transaction in respect of any goods, services or property carried out by a non-resident in India including provision of download of data or software in India if the aggregate of payments arising from such transaction or transactions during the previous year exceeds the amount as may be prescribed; or

(ii) systematic and continuous soliciting of its business activities or engaging in interaction with such number of users as may be prescribed, in India through digital means.

The Amendment has provided that the transactions or activities shall constitute significant economic presence in India, whether or not the agreement for such transactions or activities is entered into in India or the non-resident has a residence or place of business in India or renders services in India. Moreover, it is also provided that only so much of income as is attributable to the transactions or activities referred above shall be deemed to accrue or arise in India..

Accordingly, for the purpose of determining significant economic presence of a non-resident in India, the threshold for the aggregate amount of payments arising from the specified transactions and for the number of users requires to be prescribed.

In this regard, suggestions/comments of stakeholders and the general public are invited on the following:

(i) Revenue threshold of transaction in respect of physical goods or services carried out by a non-resident in India;

(ii) Revenue threshold of transaction in respect of digital goods or services or property including provision of download of data or software carried out by a non-resident in India;

(iii) Threshold for number of 'users' with whom a non-resident engages in interaction or carries out systematic and continuous soliciting of business activities in India through digital means.

Comments and suggestions may be sent electronically by August 10, 2018 at the email address ustpl3@nic.in.