India starts its own 'Google Tax' from today
Starting today, India has started an equalisation levy, popularly known as the "Google Tax", to tax payments made by Indian establishments for online advertising on international companies such as Google, Facebook, Twitter and Yahoo. However, unlike its international precedents in the UK and Australia, India's new levy is its own homegrown solution to get its share of the revenues of global Internet companies.
The move aims to indirectly tax global Internet companies who profit from Indian advertisers but cannot be taxed under current Indian laws since they are not registered in the country.
The 6% levy will apply to Indian merchants for payments exceeding Rs 1,00,000 ($1,500 approximately) in a financial year for services such as online and digital advertising. International firms with a registered Indian entity will have to pay the levy themselves, but for those that don't have such an option, it is advertisers who will deduct and deposit the tax with the Indian government.
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However, experts point out that these global firms such as Facebook and Google which dominate online advertising are unlikely to absorb the new levy themselves. Instead, they may pass on the cost to the advertisers, which include startups and small and medium business.
For instance, the Internet and Mobile Association of India has criticised the move, pointing out that "the levy will severely raise the cost of doing business of Indian tech startups and small and medium enterprises that are the primary users of digital ad platform."
"Considering that the incidence of 6% levy will be passed on to the advertisers by the ad platforms, the total burden to SMEs and tech startups on account of equalisation levy would be an additional burden of Rs 4.29 billion ($63.5 million), a massive hike of nearly 50%. This is raise the cost of operations substantially," the IAMAI added.
If this happens, India's $1 billion-strong digital advertising industry may take an unexpected hit.
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Sonam Joshi was Mashable's principal correspondent in India. She has previously worked for The Times of India group and Time Out Delhi, and written for The Caravan, Mint Lounge and Yahoo Originals.
