The government is planning to include more digital services under its new Equalisation levy also known as “Google Tax”. According to media reports, online app purchases on Google and Apple app stores are next to attract equalisation levy.
Citing people familiar with the matter, the report said that the government could issue guidelines regarding the same by December. Once 6% equalisation levy is applicable, these app purchases can get expensive by 7-8% due to aggregation of taxes.
Under the Union budget , the government had proposed a 6% equalisation levy on B2B online services, advertising and overseas online purchases that cost more than 1 lakh.
This levy was initially suggested by Organization for Economic Cooperation and Development (OECD) for taxation of modern digital services. India became the first country to adopt this levy to tax the digital economy.
The equalisation levy, also known as Google Tax, is applicable on non-resident multinational companies offering these services in India. The companies availing their services have to deduct this additional amount from the payment to these channels.
It came into effect from June this year and is currently limited to online advertising services. However, there are plans to include more digital services under this levy in future.
The main aim behind this levy is to indirectly tax non-resident tech companies offering their digital services in India. According to the government, this will ensure a level playing field by making these company pay for their advertising revenues from India.
Although, Indian startups and companies do not have to pay this amount themselves, but many startups are apprehensive about this levy. This is because Google and Facebook could eventually pass on the extra cost of this levy to advertisers only.
Moreover, in the absence of any significant Indian platform, almost every internet startup utilises digital services from Google and Facebook. So it is not possible for them to entirely switch to a different platform.