The equalization levy or so-called Google tax collection doubled from the previous year in 2020-21. This is due to bringing non-resident e-commerce operators under the tax net. This increase in tax collection comes at a time when in the US, taking steps against India, a proposal to impose a counter-duty of up to 25 per cent on various Indian products including shrimp, basmati rice, gold is being introduced.
The digital levy aims to collect tax from non-resident e-commerce operators. According to government sources, the tax collection in 2020-21 stood at Rs 2,057 crore as against Rs 1,136 crore in the corresponding period of the previous year. The figure comes after the April 7 deadline for repaying the last installment. This shows that the Equalization Levy has increased by 81 per cent year-on-year in FY 2021.
Bangalore, the country’s information technology hub, accounts for about half of this tax collection with Rs 1,020 crore. Hyderabad, a city with large IT companies, has contributed a quarter of this to the tune of Rs 538 crore. This is followed by Delhi and Mumbai from where collections of Rs 323 crore and Rs 134 crore, respectively.
A government official said, ‘Equalization levy collection is as per estimates. But the idea behind this is not collection but to bring foreign companies under the tax net in India, who earn huge money from users here but they do not have physical presence in the country. Equalization levy is merely an interim measure. We are waiting for the OECD to have a multilateral agreement on digital taxes. ‘
According to the latest data, while the net direct tax collections declined by 10 per cent in FY 2021, the country’s IT center Bangalore registered a growth of 7.3 per cent in this epidemic year.
As of 20219-20, levy at the rate of 6 per cent was applicable only to digital advertising services. In April last year, the government expanded its scope and imposed a 2 per cent tax on non-resident e-commerce companies with a turnover of Rs 2 crore annually. Its scope includes companies such as Adobe, Uber, Udemy, ZoomDotas, Expedia, Alibaba, IKEA, LinkedIn, Spotify and eBay.
Rajat Mohan, Partner at AMRG Associates, said, “Despite the expansion of the equalization levy, the e-commerce business has seen a boom in the epidemic boom last year and people following social distance norms that have leveraged collections. Is also visible. All digital businesses are established in big cities, due to which the collection of taxes in these cities is bound to increase. ‘
Meanwhile, the US, in its Section 301 report, has said that the imposition of a digital tax of 2 per cent on Indian tech giants by India is unfair, burdensome and discriminatory against US companies such as Amazon, Google and Facebook. It has invited opinion on the proposal to impose counter-charges against India by 30 April. A public hearing is to be held on May 10.
In fact, the government expanded its scope by bringing clarification in the Finance Bill 2021-22 which covered e-commerce supply or service.