The committee set up by the Central Board of Direct Taxes has recommended a tax levy of 6-8% on business-to-business (B2B) digital transaction of more than Rs 1 lakh, in an effort to prevent tax avoidance enjoyed by foreign companies.
The proposal comes in the backdrop of the recent budget plan to “tap tax on income accruing to foreign e-commerce companies from India”, from online advertisements.
Also called the ‘Google tax’, the idea is to ensure that every payment made to a non-resident for online ads will have to deduct this tax before making the payment.
The recommendation, however, goes beyond just digital ads and include other B2B services as:
- Online advertising or any services, rights or use of software for online advertising, including advertising on radio & television.
- Digital advertising space.
- Designing, creating, hosting or maintenance of websites.
- Digital space for websites, advertising, e-mails, online computing, blogs, online content, online data or any other online facility.
- Any provision, facility or service for uploading, storing or distribution of digital content.
For now, the levy is proposed for only B2B transactions, however, according to the committee, this might be expanded to business-to-consumer (B2C) transactions of downloading of songs, movies and books, online consumption of news and software downloads in the coming years.
The levy is expected to affect not only large multinational corporations but also smaller companies.