Facebook, Google, Amazon, Twitter may have to pay up to 40% digital tax in India soon, says report

The Central Board of Direct Taxes — the policy-making body of the income tax department — draft proposes to impose tax at 30 to 40 per cent rate based on the revenues and user base of tech giants in India

Google corporate tax

File photo  |  Photo Credit: BCCL

 

Source: ETNOWNEWS.COM

New Delhi: Tech companies such as Facebook, Google, Amazon, and Twitter are expected to pay a ‘digital tax’ in India soon as the Central Board of Direct Taxes (CBDT) — the policy-making body of income tax department — is ready with a draft proposal under the concept of “significant economic presence”, also known as digital permanent establishment (PE), the Business Standard reported citing sources aware of the matter.

The CBDT draft proposes to impose tax at 30 to 40 per cent rate based on the revenues and user base of such companies in India, it said.

The financial daily quoted an unnamed senior government official as saying, “This is for digital services offered by global firms in the country from the unit based outside the country. The new tax will be imposed on the basis of revenues derived from the activities of Indians using search engines, social media platforms, and online marketplaces.”

To recap, in the Union Budget 2018-19, the government had proposed to amend the Income Tax Act to tax digital companies with a large user base or significant economic presence in the country.

At present, the proposed tax is in accordance with the existing tax structure for foreign entities that have offices in India. India taxes corporate income at 30 per cent, while subsidiaries of foreign firms in India have to pay 40 per cent. Also, the authorities charge 6 per cent tax for the payment made by a resident company to foreign online companies for digital advertisement. Last year, the income tax department collected Rs 800 crore through this levy, the official cited above told the publication.

Many experts are of the opinion that foreign digital firms have a large consumer base in India but don’t pay adequate taxes domestically, and there is a global drive to bring the digital behemoths under the realm of local taxes.



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