From October, Google will pass on the 2% equalisation levy to clients if their advertisements are visible in India. This will apply to its overseas clients even if the buyer and seller are both based outside India. The equalisation levy was introduced in 2016 on non-resident businesses. It applies to specified services such as online advertisements, providing digital advertising space, etc., and the rate applicable is 6%.
The scope was expanded to include e-commerce operators from 1st April 2020, courtesy of the Finance Bill 2020. The consideration received by e-commerce operators from the supply of goods or services will be taxed at 2%. For the purpose of this levy, an e-commerce operator has been defined as a non-resident who owns, manages, or operates an electronic facility or platform for the online sale of goods or services.
The scope was expanded with an intent to tax internet giants’ digital advertising revenues from India, to include purchases by Indians or India-based entities through overseas e-commerce platforms. Previously, e-commerce operators that had a presence in India but billed their customers from offshore units, escaped India’s tax regime. This levy will bring such companies under the ambit of tax. These businesses will be billed if their advertisement is visible in India. The 2% tax will be applied even in cases where just a small part of the transaction was carried out online, with the rest of the transaction taking place offline.
A statement released by Google said, “From 1st October 2021, we’ll be adding a surcharge to the invoices we send to non-Indian customers whose ads are viewed in India. The surcharge is to cover part of the costs associated with complying with the Indian equalisation levy, which only impacts non-Indian advertisers. We will continue to pay all the taxes due in India and elsewhere.”
Google had already been passing on digital service taxes to advertisers for ads displayed in Turkey, Austria, the UK, France, etc. From October, it will do the same for ads displayed in India as well.
For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in
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