On Monday 30th May new rules for equalization levy or ‘Google tax’ was announced by the government. Google tax is taxation of payments for international digital services by Indian businesses which was earlier introduced in the Budget. The idea is to indirectly tax internet giants for money they make from Indian advertisers, by imposing a levy on the payments these advertisers make. “Equalisation levy made various players sit up and take notice, especially since this is India’s first step to tax digital economy , and one of the first few internationally,” said Rakesh Nangia, managing partner at Nangia & Co.
What is Google tax?
From today, June 1st, an equalisation levy of 6% will have to be deducted by a business entity in India whose aggregate payment in a financial year exceeds INR 1 lakh for specific services to a non-resident service provider.
What are the services that fall under this rule?
The services that are included in for Google tax:
- Online Advertisements
- Provision for digital advertising space
- Other services for the purpose of online advertising
What is the purpose of this tax?
The purpose is to bring the entire technology firm under India?s tax net which gains from online advertisements.
How does it impact us?
This new tax rule impacts anyone and everyone who wants to or uses Google and Facebook for marketing.
What if a firm fails to deduct this tax?
Then the firm or the business owner won’t be allowed to consider the expenses in calculating taxable profits, which will increase their taxable income and liability.