India collecting large sums from equalization levy on online advertising

by Prabhakar K S, Shree Tax Chambers, Bengaluru, Karnataka, India

With India’s 6 percent equalization levy or ‘Google Tax’ on online advertising revenue in place for almost two years, the government is beginning to assess the impact of the new law and consider how to improve it.

So far, the results seem promising. The Indian government has received additional taxes from the controversial levy of INR 560 Cr. (USD 87 million) and INR 600 Cr (USD 90 million) for the financial years ending 2016–17 and 2017–18 respectively, according to Economic Times sources, an April 27 report said.

Further, Indian tax officials believe that the taxes received to date are just a fraction of what India will eventually collect.

“Tax receipts from digital economy firms at present is not even the tip of the iceberg,” a finance ministry official told Livemint on condition of anonymity.

The official added that industry-wide consultations are planned to revisit the equalization levy and improve it, the April 26 Livemint report said.  The coming government consultation will address the definition of permanent establishment as applied to offshore firms.

Another source told the Economic Times that it is possible that the levy will gradually be increased from 6% to 8% and be expanded other services.

Prabhakar KS is a tax specialist and founder of Shree Tax Chambers, Bengaluru, Karnataka, India.



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