This is the first time that the Budget also mentioned about overseas digital companies having presence in India. The government wants to tax digital businesses by amending Section 9 of the Income Tax Act. Currently a digital firm is out of the tax net as it operates from another country but have significant online presence worldwide.
The digital tax, if levied, will impact companies like Google, Facebook or Netflix, among others.
India may outline a feasible structure for taxing digital entities that have a large user base or business in a country but don’t have a significant physical presence there.
Analysts feel the discussion is part of the OECD and G20 Base Erosion and Profit Shifting (BEPS) and India is the first country to have taken concrete steps in this direction.
Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP, commented: "Till now, there was no system to tax them. The equalisation levy was imposed only for online advertising which is a very small chunk of their operations. The government is now saying that they have the right to tax such companies under section 9, which have some economic nexus in India.”
India may outline a feasible structure for taxing digital entities that have a large user base or business in a country but don’t have a significant physical presence there.
Analysts feel the discussion is part of the OECD and G20 Base Erosion and Profit Shifting (BEPS) and India is the first country to have taken concrete steps in this direction.
Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP, commented: "Till now, there was no system to tax them. The equalisation levy was imposed only for online advertising which is a very small chunk of their operations. The government is now saying that they have the right to tax such companies under section 9, which have some economic nexus in India.”
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