Tech giants seek deferment of new equalization levy applicable

Hemani Sheth Mumbai | Updated on April 01, 2020 Published on April 01, 2020

Tech majors including Google, Facebook, Amazon, Microsoft, and Adobe, along with seven top industry associations representing these internet and technology giants are seeking deferment of the equalization levy which comes into effect today according to media reports.

The tech giants were in talks to seek the deferment as the companies are currently battling the repercussions of the coronavirus pandemic, Reuters reported on Tuesday.

The firms along with the industry associations have sought withdrawal of the new equalisation levy and have written a joint letter to United States Trade Representative Robert E Lighthizer for the same, Economic Times reported.

The tax was first introduced in 2016-17 and is often referred to as “google tax”. It was applied on the ad revenue in the form of payments for digital advertisement services received by companies abroad who do not have a permanent establishment (PE) in India and if the payments exceeded ₹1 lakh in a year.

According to the Indian Finance Bill 2020 which was passed in the Parliament on March 23, the scope of the equalization levy had been extended to cover “e-commerce supply or services” (including facilitation) w.e.f. April 1, 2020.

The tax was previously applicable only to digital advertising players such as Google. After extending the scope to e-commerce players, it is now applicable to all kinds of digital e-commerce transactions into India, as well as to transactions using Indian data.

The applicable tax rate is two per cent (plus a surcharge) on amount of consideration received/ receivable by an e-commerce operator. The companies using digital services are required to withhold the tax amount.

Executives from top tech firms discussed the issue on conference calls arranged by the US-India business lobby groups last week and are looking to seek six months deferment of the tax for at least six months, as per the Reuters report.

Google’s primary concern is that it will not be able to identify countries where advertising arrangements use data of Indian users in time, it said.

According to the letter, the companies said that the tax was incorporated into the Union Budget 2020 at a later stage without any public consultation or Parliamentary debate when it is set to apply within a week, ET reported.

The Computing Technology Industry Association (CompTIA), Information Technology Industry Council (ITI), Internet Association (IA), US-India Strategic Partnership Forum (USISPF), United States Council for International Business (USCIB) and two other industry bodies have jointly written the letter along with tech majors, ET reported.

The Internet and Mobile Association of India (IAMAI) has also raised concerns about the equalization levy and have written to the Finance Ministry about the same as per reports.

Published on April 01, 2020

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