IAMAI recently published a report saying that 6% of Google Taxes will harm Indian start – ups in terms of their marketing costs and operating costs. India is the third largest start – up ecosystem according to NASSCOM report.
6% equalisation levy tax is proposed by Modi’s government on Digital Ad firms.
Until now, Indian start-ups are paying 14.5% service tax to Indian ad platforms, which estimated INR 906 crore of government taxes. Even after the GST, the rate was close to 18 percent, so the cost of operations for the Indian start-ups automatically increased.
Government proposed an equalization levy of 6 percent on advertising payments made by business in India earlier this march.
WHAT IS GOOGLE TAX OR EQUALISATION LEVY?
According to Wikipedia, Google Tax is a popular term used to refer to anti- evitement provisions in several jurisdictions concerning profits or royalties that have been diverted to other jurisdictions with lower or nil rates.
Many steps have been taken to ensure that companies like Google and Facebook pay for the money they make from local advertisers. In the long term, this could act as a basis for taxing cross- border digital transactions and potentially increase the costs for advertisers in accordance with INC42 Magazine.
SALIENT FEATURES OF GOOGLE TAX
- It is the taxation of the e – commerce transaction / digital enterprise that is carried out without regard to national borders.
- The equalization levy would be 6 percent of the amount of consideration for certain services received or received by a non – resident who does not have a permanent establishment (‘ PE’) in India, a resident in India who performs business or occupation, or a non – resident who has a permanent place of business in India.
- Central government must notify about any provision regarding specified services like online advertisement, digital advertising space, or other services/facilities for intended online advertisement and services
- If aggregate amount of consideration is less than Rs. 1 lakh in any previous tear than no levy is charged.
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