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Mahesh

19/08/22 03:10 AM IST

India won't make sovereign commitment on future digital services tax

In News 
  • India and other developing countries under the G24 grouping have objected to the proposal of making sovereign commitments to not introduce any future digital services tax like equalisation levy.
  • The developing countries are of the view that any commitment to not enact future measures should be in the nature of political commitments only.
Digital Tax Scheme 
  • Government in Finance Bill of 2020-21, imposed a 2% digital service tax on trade and services of foreign e-commerce companies such as Amazon and Walmart-owned Flipkart and others having an annual turnover of ₹2 crores or more.
  • Group of 24: It was established in 1971 as a chapter of the Group of 77 of developing countries in order to coordinate on monetary and developmental issues.
Tax Composition
  • In order to streamline the global governance of digital companies such as Google, and Facebook, a global tax deal under OECD’s two-pillar plan was agreed upon in 2021 (including by India)
  • Two pillars-  Under pillar 1- All multinational enterprises (with turnover over 20bn Euro and profit of over 10%) will have to relocate part of their profit to the place where they sell their products.
  • Under Pillar 2: All enterprises (with revenue over EUR 750mn) will have to give a minimum corporation tax of 15%. It will bring in ‘global minimum corporation tax’ to be implemented from 2023.
  • Equalization Levy- Equalization Levy is a direct tax (of 6%), introduced in India in 2016 to tax foreign firms (such as Google, and Facebook) with now permanent establishments in India but profits from it. It was reaffirmed in Finance Act 2020 and expanded to include non-resident e-commerce operators (such as Amazon), by a new levy of 2% (digital service tax)
Source- Financial Express 

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