India may have to let go digital tax as it agrees on global taxation rule
The government in April 2020-21 widened the scope to impose a 2% tax on non-resident e-commerce firms with a turnover of Rs 2 crore.
Published: 10th October 2021 12:52 AM | Last Updated: 10th October 2021 10:28 AM | A+A A-
Representational Image. (File Photo)
NEW DELHI: India may have to let go digital tax from October 8, however, it expects to gain from the deal higher as it, along with the group of 136 countries, has agreed on global taxation to ensure big companies pay a minimum tax of 15%, making it difficult for them to evade tax.
“No newly enacted digital services taxes or other relevant similar measures will be imposed on any company from 8 October 2021 and until the earlier of 31 December 2023 or the coming into force of the multilateral convention,” said the OECD statement, adding that the modality for removing existing digital services taxes “will be appropriately coordinated,” said a statement issued by the Organisation for Economic Cooperation and Development (OECD) late on Friday.
India introduced a digital service tax called equalisation levy in 2016 on online advertisements, which has now been expanded to cover sale of goods and provision of services through e-platforms like Amazon, Google, Netflix, Facebook among others.
The government in April 2020-21 widened the scope to impose a 2% tax on non-resident e-commerce firms with a turnover of Rs 2 crore.
“At present it is difficult to give a number but we had kept the interest of country above. The gain as per our calculation is at least two folds, even if we let go the digital tax,” a finance ministry official said.
India collected Rs 2,057 crore from equalisation levy in 2020-21, a growth of 85% over Rs 1,136 crore in the last fiscal.
However, experts said that it is not a bad deal as India expects to gain much more than it has to let go on digital tax.
Pillar 1 deals with reallocation of additional share of profit to the market jurisdictions where the users are. The second pillar relates to a global minimum tax at 15%.
“Two pillar solutions finally agreed will result into redistribution of $125 billion taxable profits annually, and ensure global MNEs pay minimum 15% tax once these measures are implemented in 2023 through a multilateral convention (MLI 2.0) to be signed next year,” Sumit Singhania, partner, Deloitte India, said.
OECD has estimated that developing countries are expected to gain an additional 1% of corporate income tax (CIT) revenues, on average.
