India will eliminate the equalization levy or ‘Google tax’ imposed on internet companies after a global tax deal is agreed between representatives of 136 countries. But make sure that digital companies like Google, Facebook, Netflix and Microsoft pay a minimum rate of 15%. Where they work.
India currently receives Rs 4,000 crore from the equalization levy, which will have to be withdrawn as part of the new global tax deal finalized by the Organization for Economic Co-operation and Development (OECD) on Friday. This deal will come into force in 2023. As part of the proposed deal, the OECD has sought immediate removal of unilateral digital tax regimes such as the equalization levy and a commitment not to introduce such measures in the future.
The Finance Ministers of the G20 countries will meet and discuss the Global Tax Deal on 13 October which will also be attended by Finance Minister Nirmala Sitharaman. Currently, digital companies do not pay any tax in India other than the 2%-6% equalization levy levied on their annual revenue.
India has also opposed the immediate removal of the equalization levy by developed countries or providing credit to companies in lieu of it. Government officials quoted in an Economic Times report said the country would not allow revenues to drop until the deal was finalised. The new global tax regime is expected to be implemented by 2023-34.
Digital companies that do not have a permanent establishment in India will have to pay a similar duty on revenue of more than Rs 2 crore. This is an over 6% levy on payments for digital advertising services introduced in 2016. However, the proposed global tax framework may be discussed further as the threshold for imposing a global tax is still too high. Grant Thornton India’s National Leader Tax Vikas Vasal told The Economic Times that there is likely to be more discussion on global tax details so that countries like India do not suffer as the threshold for implementing the new tax rules is too high.