Govt finalising framework to tax large foreign tech firms such as Google, Facebook

These limits are part of the ‘Significant Economic Presence’ (SEP) concept that was introduced in the budget last year.
Govt finalising framework to tax large foreign tech firms such as Google, Facebook
Govt finalising framework to tax large foreign tech firms such as Google, Facebook
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There may be a proposal under consideration of the Indian government to bring some of the top technology companies under the ambit of tax. This will be for the revenues these companies generate out of their operations in India, as per reports. Some of these entities could be Google, Facebook, Twitter or any other company that comes into this category. These are typically online entities and have large user bases in India and their revenues could be in the form of subscriptions and advertisements. They however raise no invoice here and therefore are out of the tax ecosystem. They may not reflect these incomes in their Indian entities and therefore they are not currently assessed for Income Tax either.

The government may however fix some kind of a threshold for this. The figure being floated now is Rs 20 crore in terms of revenue and 500,000 user base, above which they will have to pay taxes. The current thinking is that only direct taxes on the profit earned out of Indian operations will be considered.

This move may not come as a surprise since last year itself the government had used the ‘Significant Economic Presence’ (SEP) concept in the budget to address this aspect. The government may even include these in the Direct Taxes Code that it is in the process of finalising. India may not be the only country thinking on these lines. The European Union is said to be exploring a similar possibility of taxing the Big Tech corporations.

Some local entities had already represented to the finance ministry on this issue and the ministry too had invited comments from the public on this. There had not been any movement in this so far.

India has even taken the matter of taxation of profits made by online entities to the G2o nations asking them to develop a consensus. A common view among all these nations may not be feasible. There are reports that the EU and France have already made some moves independently.

The large corporations like Google will not easily fall in line either. Already there is a case pending in the Karnataka High Court over tax dues raised by the Indian Income Tax department. These companies play with terminologies to get away from being taxed as well. Google for example calls it ‘cost’ which the IT department disputes.

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