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No digital tax if goods sold via India arm

Topics Covered:Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

No digital tax if goods sold via India arm:


Context:

Through the amendment to Finance Bill 2021, the government has clarified that offshore e-commerce platforms don’t have to pay 2 per cent equalisation levy if they have permanent establishment or they pay any income tax here.

  • However, foreign firms who are not paying any tax will have to pay.

Who has to pay the digital tax?

The digital tax introduced in April 2020, applies only to non-resident companies with annual revenues in excess of Rs 2 crore, and covers online sales of goods and services to Indians.

The “Equalization Levy” in India:

It is a tax aimed at foreign digital companies. It has been in place since 2016.

  • The new amendment, effective from April 1, 2020, expands the equalization levy from online advertising to nearly all online commerce activities done in India by businesses that do not have taxable presence in India through applicability of 2% on its revenues.
  • Specifically, it is levied on consideration receivable by the e-commerce operator for supply or services or facilitation of supply or service to – Person resident in India, Non-resident under specified circumstances such as through sale of data collected from a person resident in India, and Person who buys goods or services through an IP address located in India.

Please Note:

GAFA tax— named after Google, Apple, Facebook, Amazon—is a proposed digital tax to be levied on large technology and internet companies. France has decided to introduce the tax (3% tax on revenues from digital activities).

InstaLinks:

Prelims Link:

  1. About the equalization levy.
  2. Applicability.
  3. Exceptions.
  4. About GAFA tax.

Mains Link:

Discuss the issues associated with the implementation of equalization levy.

Sources: the Hindu.