In what would impact majors websites such as Facebook, Twitter and Google among others, the government on Monday released proposals to tax payments of more than Rs 1 lakh made by Indians to non-residents for specified e-commerce transactions.
According to the report of a Central Board of Direct Taxes (CBDT committee: “The equalisation levy may be imposed on specified digital services and facilities including online marketing and advertisements, cloud computing, website design and hosting and maintenance, digital space, digital platforms for sale of goods and services and use or download of software and applications.”
The report comes as a backdrop to the budget proposal to “tap income accruing to foreign e-commerce companies from India”.
The levy will work by making it a responsibility of the Indian company to deduct this tax in advance while making payments to a non-resident for transactions.
The report recommends that the levy may be “charged at a rate between 6-8 % of the gross payment made for specified services.” The recommendation aims to keep “almost all B2C transactions, as well as a very large number of B2B transactions outside the scope of the levy, thereby limiting its impact for the common man”.
Rakesh Jariwala, tax partner, media and entertainment at EY said: “The report has wider implications, however, we have to wait for the recommendations to be accepted.”