Policy

FinMin rules out clarification, FAQ on ‘Google Tax’

Shishir Sinha New Delhi | Updated on July 21, 2020

Equalisation Levy is not applicable on any e-commerce operator with a permanent establishment in India   -  istock.com/marchmeena29

₹200 cr has already been collected so far this fiscal

The Finance Ministry has ruled out issuing any clarification or frequently asked questions (FAQs) on Equalization Levy, also known as ‘Google Tax’, on non-resident e-commerce companies.

“Is there a need? The law is very clear,” a senior Finance Ministry official told BusinessLine.

Last week, India responded to the US Trade Representative Office on the issue, saying the underlying policy objective and application of Equalization Levy is to ensure that neutral and equitable taxation is applicable to e-commerce operators that are resident in India, or have a physical presence here, and those that aren’t. The purpose is to ensure a level playing field with regard to e-commerce activities undertaken in India.

In fact, some companies have already paid. The total amount (without bifurcating the levy at the rate of 6 per cent on digital ad and 2 per cent on non resident e-commerce companies) collected in Equalization Levy so far this fiscal is around ₹200 crore.

Introduced in 2016, Google Tax was initially applicable to payments for digital advertisement services received by non-resident companies without a permanent establishment here, if these exceeded ₹1 lakh a year. The rate of tax was 6 per cent. The companies using these services were required to withhold the tax amount.

 

In the 2020-21 Budget, the government widened the ambit of the levy by including e-commerce companies. The applicable tax rate is 2 per cent (plus a surcharge) on the amount of consideration received/receivable by an e-commerce operator. This came into effect on April 1 and July 7 was the due date for the first instalment.

In this context, an e-commerce operator refers to a non-resident who owns, operates or manages a digital or electronic facility or platform for online sale/provision of goods/services or both.

The levy is not applicable on any e-commerce operator making/providing/facilitating e-commerce supply or services, having a permanent establishment in India. It is also not applicable on e-commerce supply or services effectively connected with such a permanent establishment. Also, an operator with an annual turnover of up to ₹2 crore is exempted from the levy.

Internal transactions

Some companies have complained that Google Tax will be levied even on transactions between branch offices and the head office through the digital platform.

The Finance Ministry official quoted above said these are just hypothetical queries, and do not reflect ground realities. “You start complying with the law. If you have any doubt, raise the issue, we will deal with it as it comes,” he said, urging more companies to work towards compliance.

Published on July 20, 2020

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