No digital tax on goods, services sold through Indian branch of Indian e-commerce players

To provide a level playing field, the government has decided not to impose a 2% digital service tax on selling goods and services through the Indian branch of foreign e-commerce players.

An amendment to the Finance Bill 2021 makes it clear that offshore e-commerce platforms do not have to pay a 2% equalization levy on permanent establishment or pay any income tax here.

However, foreign companies that are not paying any tax will have to pay.

The digital tax, introduced in April 2020, applies only to non-resident companies with an annual income of more than ₹ 2 crore, and covers online sales of goods and services to Indians.

Finance Minister Nirmala Sitharaman, while replying to the debate on Finance Bill 2021 in the Lok Sabha on Tuesday, said, “Through government amendment … I want to clarify that this right to equality does not apply to goods that belong to Indian residents.” Are near. ” .

Pointing out that this government is in favor of digital transactions, he said, “We will never do anything to weaken it.” But still, the same levy is a tax imposed in India to give a level playing field between Indian businesses paying tax and foreign e-commerce companies that do business in India, but there is no Do not pay income tax. “The equality levy became a controversial issue after the US declared it discriminatory against American firms.

Defending its stand, India stated that the levy aims to provide greater clarity, certainty and predictability to all stakeholders regarding the characterization of digital services and consequently payment for tax liabilities, so as to reduce compliance and administration costs. Can also be reduced. Tax dispute in these cases.

The parity levy is seen as an additional levy against BEPS (Base Aerosion and Profit Shifting) and revenue loss in India due to the activities of e-commerce operators in the country.

The concept of a similar levy in India emerged as a result of the deliberations of the OECD Base Aerosan and the Profit Shifting Project, which crystallized in the BEPS project report.