40% Digital Tax Proposed For Facebook, Google, Amazon, Netflix For Doing Business In India
Very soon, foreign-based digital companies like Google, Amazon, Facebook, Twitter etc doing business in India, will have to shell out up to 40% tax.
This shall be known as Digital Tax.
What is the logic behind this new tax? Keep reading to find out more!
Govt. Recommends Digital Tax
As per an exclusive report by Business Standard, Central Board of Direct Taxes (CBDT) has proposed that digital companies operating in India should pay 40% tax to the Govt.
If this proposal is accepted, then digital biggies such as Facebook, Amazon, Google, Salesforce, Twitter and others will be asked to shell out 40% tax.
This tax will be levied on the income which is generated by these digital companies, after operating in India.
A new concept of “significant economic presence” has been proposed by CBDT, based on which this taxation will be levied.
Will Every Foreign Digital Company Need To Pay This Tax?
As per the reports coming in, this special tax of 40% will be imposed only on those digital companies, which have more than 200,000 users.
Now, it is not clear whether these 200,000 would be those users who are paying to these digital companies or are just free users. For instance, Facebook has around 24 crore users in India, but they are not paying anything to Facebook.
However, there are thousands of businesses in India, which are paying Facebook for running advertisement campaigns.
Besides, the tax range have been proposed as 30% to 40%, and it will depend on total number of users, revenues generated from Indians and more such factors.
The Logic Behind This New Digital Tax
As per existing taxation rules in India, corporates based in India pay 30% tax to the Govt., but the foreign companies having permanent offices in India pay 40% tax.
This clause is used by digital companies to save tax.
The permanent establishment (PE) factor prohibits these foreign-based digital companies from paying tax in India.
As of now, digital companies such as Facebook and Google pay 6% tax on the payments received to them from Indian companies. Rs 800 crore was earned by Indian Govt. for this taxation.
But, if 40% tax rule is approved, then they will have to pay a lot more tax money.
Indian Govt. has consulted with taxing authorities from more 180 countries, and 70% of them support this proposal of Digital tax.