India Notifies Rules For Digital Tax

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Starting April 2022, overseas entities that don’t have a physical presence in India but derive significant financial benefit from Indian customers will come under the Indian tax net. The levy will impact technology giants like Facebook Inc., Google, Amazon.com Inc., Alibaba Group Holding Ltd. and other such digital companies that derive considerable value from a large user base in India.

While the main legal provision was introduced in 2018, the revenue department notified the thresholds for the purposes of significant economic presence (SEP) on May 3. Experts BloombergQuint spoke with said the move was surprising.

In her budget speech last year, Finance Minister Nirmala Sitharaman had said SEP provisions are being deferred given that the G-20 OECD report on digital economy is expected by December 2020, according to Shefali Goradia, partner at Deloitte India.

Shefali Goradia, Partner, Deloitte India
Curious timing apart, the concept was introduced via Finance Act, 2018, to enlarge the scope of income of non-residents that accrues or arises in India, by establishing a “business connection” of the foreign entities.

At the time, the government had articulated its intent that it should get its fair share of tax from business-to-consumer transactions. The idea is to tax profits of those online and offline businesses that don’t have a physical presence in India but derive significant economic value from the country.

Soon after, the Central Board of Direct Taxes floated a consultation paper seeking views on thresholds that should be applied to bring such businesses within the tax net.

The department has now notified those:

Transaction Threshold: Any non-resident whose revenue exceeds Rs 2 crore for transactions in respect of goods, services or property with any person in India. This will include transactions on download of data or software.
User Threshold: Any entity that systematically and continuously does business with more than 3 lakh users in India.
The threshold is very low and should have been a little reasonably set, Ajay Rotti, partner at Dhruva Advisors, pointed out. “Given the Indian e-commerce market and the current situation, even smaller players will have more users than this.”

In short, once an overseas entity hits either this transaction threshold or the number of users, it’ll be seen as an entity that has business presence in India.

To be clear, only those entities will get impacted by the SEP provisions who come from non-treaty jurisdictions. That’s because the treaties specify non-resident entities will come under the tax net only if they have a permanent establishment in India. Permanent establishment is, in tax parlance, a fixed place of business. India currently has a Double Taxation Avoidance Agreement with 97 countries, including the U.S., U.K., Australia, Netherlands, among others.

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Are bhai, JioMart ko aage bhi to badhana h. Tax on other ecommerce websites and full chhoot to ambabi ji.

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shivrajsingh wrote:

Are bhai, JioMart ko aage bhi to badhana h. Tax on other ecommerce websites and full chhoot to ambabi ji.

Bezos bhai mighy apply for Indian citizenship stuck_out_tongue_closed_eyes

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shivrajsingh wrote:

Are bhai, JioMart ko aage bhi to badhana h. Tax on other ecommerce websites and full chhoot to ambabi ji.

It dose not affect companies… Tax Revenue will be shared by indian govt from the revenue kitty of foreign govt..

If Twitter pays tax on indian operation to indian govt – same amount of tax they claim in respective home country tax returns..

This dose not affect companies at all.. But only enhances compliance burden.. Thats all..

What ever revenue generated in india should be taxed in india only.. Not in foreign countries..

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Bk100 wrote:

It dose not affect companies… Tax Revenue will be shared by indian govt from the revenue kitty of foreign govt..

If Twitter pays tax on indian operation to indian govt – same amount of tax they claim in respective home country tax returns..

This dose not affect companies at all.. But only enhances compliance burden.. Thats all..

What ever revenue generated in india should be taxed in india only.. Not in foreign countries..

But am not able to understand why they were sleeping for so many years and they come running after salaried every Feb pensive

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caks2006407 wrote:

But am not able to understand why they were sleeping for so many years and they come running after salaried every Feb pensive

Yes. Mostly relaying on salaried person instead of these foreign companies who earn in india but not pay tax in india is unfair..

Missing