Revenue dept opposed to deferment of 2% levy on foreign e-commerce firms
e-commerce rather flourished due to pandemic as online business activities increased, said government officials.
Even as global business bodies queue up at finance ministry seeking deferment of equalisation levy by 9 months, the revenue department is not in favour of this.
According to senior government officials, the revenue department of the finance ministry, which is the custodian to collect this levy, is of a view that "the e-commerce giants are flourishing and thus their is hardly any merit in their plea."
Not just this, two senior government officials dealing with the matter told CNBC-TV18 that "non-resident e-commerce companies are seeking a deferment by nine months due to the crisis triggered by COVID-19, on the contrary, due to the pandemic, globally it is only such e-commerce giants which have generated more business. Even in India, tax department has seen that during the ongoing lockdown, giants like Netflix, Facebook, Google, Amazon and many more saw huge traffic and a sudden increase in subscriptions and business. Thus, it is not a genuine demand."
Apart from this, the revenue department is also of a view that if at all any tax deferment or reduction has to be given, then the first priority will be "individuals and the micro, small and medium enterprises of the country, which are suffering due to COVID 19."
However, the government is yet to take a final call and is still in the process of dealing with various issues associated with this.
Experts are also of mixed opinions.
Akhilesh Ranjan, former member of Central Board of Direct Taxes (CBDT) and who was working on this subject for the government for the longest tenure, said, "The concerns raised by global bodies on economic hardship for these companies may not be valid. But the levy did come in all of a sudden in March and it will certainly take them some time to put the required systems in place. It is also a very new and globally unprecedented levy and many aspects need clarification."
International business bodies, with members such as Walmart, Amazon, Google, Netflix, etc., had recently written to Finance Minister Nirmala Sitharaman for deferring of 2 percent levy imposed on non-resident e-commerce companies by nine months due to the ongoing crisis triggered by COVID-19.
In a joint letter to the minister, the business bodies represented by American, European, Australian and Asian foreign companies mentioned that under the commitment of G20 leaders including that of Prime Minister Narendra Modi, India spoke about a free, fair, nondiscriminatory, transparent, predictable, and stable trade and investment environment, and has been pitching to keep global markets open.
"It is in the spirit of this international commitment that we write to respectfully request a formal stakeholder consultation on the expansion of the Equalisation Levy and a delay by at least nine months of the implementation of Section 165A of the Union Budget 2020," the joint letter had said.
The joint letter was sent by a group of nine business bodies including US India Business Council, Information Technology Industry Council, Japan Electronics and Information Technology Industries Association, Asia-Pacific MSME Trade coalition and DigitialEurope.
Representations have also been received by the finance ministry to give clarity on the same 2 percent equalization levy.
Recently, raising concerns, stakeholders had approached the Central Board of Direct Taxes (CBDT) about the provisions moved by the government to bring in non-resident e-commerce operators within the ambit of equalization levy or what is popularly known as Google tax.
Non-resident e-commerce operators are the ones who do not have a permanent establishment in India but do have a presence in the country.
It was in the passage of the Finance Act 2020 that the government had introduced this levy. Equalisation Levy is a levy on the procurement of online advertising from a non-resident or a foreign company. In this case, a six percent levy is to be paid by the payer in India.
From April 01, 2020, it has also been extended to non-resident e-commerce operators providing goods or services to residents in India and to non-residents if it pertains to online advertising targeted in India and sale of data for Indian consumers. In this case, the levy shall be 2 percent and shall be paid by an e-commerce operator only on a quarterly basis. The government has also said that the e-commerce operator shall also be required to file an annual return in Form-1.
First Published: May 4, 2020 11:50 AM IST
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