India announced last week that a tax of 2% would be levied on April 1 for all foreign bills for digital services provided in the country.
- Last update: April 1, 2020, 12:51 am IST
Major U.S. technology companies like Google and Facebook are planning to postpone a new Indian digital tax that caught them unprepared as companies fight the consequences of the coronavirus pandemic, three industry sources told Reuters. India announced last week that a tax of 2% would be levied on April 1 for all foreign bills for digital services provided in the country. For foreign billing, companies abroad pay for a service that is provided to customers in India.
The tax would also apply to e-commerce transactions on websites like Amazon.com, as well as to advertising revenue from overseas companies if they ultimately “target a customer” in India, the government said. Senior technology company executives met last week for conference calls organized by lobby groups in the Indian economy and decided to move at least six months, the three people who were informed of the talks said. They asked not to be mentioned because the discussions were private.
Google is particularly concerned that it will not be able to quickly identify countries that have advertising agreements for Indian users, which, according to one source, increases technology and compliance requirements. “Everyone wrestles. The current downturn is focused on protecting the business affected by coronavirus, ”said the source, who works for a global technology company, and described the tax as a” big, big headache. ” Google, Amazon and Facebook declined to comment. The Indian Treasury did not respond to requests from Reuters.
The extent of possible compliance disruptions caused by the tax, a so-called compensation levy, was neither immediately clear nor how much India could earn from the tax. Indruj Rai, a partner in the law firm Khaitan & Co, said the government’s move appears to be aimed at taxing foreign companies that had a significant local customer base but who settled them through their offshore or foreign entities. “The timing of the levy appears to be an attempt to increase revenue during the pandemic,” added Rai. The new tax has been included in the 2020-21 budget changes last week, leaving companies with just a few days to prepare. The levy was not part of the budget proposals first submitted on February 1.