Daily Management Review

Lobby Group Says US Tech Firms In India Not Yet Willing To Pay New Digital Tax


Lobby Group Says US Tech Firms In India Not Yet Willing To Pay New Digital Tax
United States based technology giants operating in India are not yet ready to make the first payment of the digital tax imposed by the government that is due this week, said a lobby group representing those tech firms. The lobby has urged the government to defer the move to impose the tax for the time being.
The US technology firms in India were caught off guard as they were battling the coronavirus pandemic with the Indian government in March announcing the imposition of a 2 per cent tax for all foreign billings for digital services provided in the country starting from April 1. This tax is applicable for transactions on e-commerce platforms on platforms such as Amazon.com.
The new tax regime is particularly worrying for Google because it includes all advertisement revenues generated by the company overseas if those ads were targeted at Indian consumers.
The Indian finance ministry was urged to defer the tax or postpone the date for payment of the first quarterly payment of the tax due on Tuesday, in a letter sent to the ministry by lobby group U.S.-India Strategic Partnership Forum (USISPF) on July 6.
The new tax did not make it clear on what amount the companies needed to pay the levy and was “riddled with various ambiguities and interpretational concerns”, the group argued. “There are practical difficulties in meeting this timeline,” USISPF wrote to the finance ministry in the letter as seen by the media.
There were no comments available from the Indian finance ministry. The letter from the lobby group had been sent to the finance ministry since it wanted to request the government to help in resolving concerns the member companies of the group, said USISPF’s managing director for India, Nivedita Mehra.
The Indian government was committed to implementing the tax, reported the media quoting an Indian government source this week.
Those foreign tech companies that have a significant local client base in India but are raining bills for revenues generated from the country through their offshore units and thereby effectively avoiding paying taxes in India are the target of the new digital tax which has been code named as equalisation levy.
The new dictate of the Indian government for foreign tech companies to obtain an income tax identification number for tax payments will create massive “administrative challenges” for some of the foreign companies, USISPF also said in its letter to the Indian government.