Tax on blogs and online – Where is India’s tax administration headed?

Tax on online ads run by foreign companies will hurt #StartupIndia, #MakeInIndia initiatives

June 14, 2016

On June 10th, bloggers and online advertisers in India were in for a surprise – an email from service providers such as Google. According the email, from June 1 onwards, Government of India will charge 6 percent advertisement fee for all sorts of online advertisements displayed. Even though the circular says this is applicable to foreign companies displaying in India, the it affects all as major service providers such as Google are foreign companies. The new tax is known as Equalisation Levy.

Indian’s noted blogger Ravi Narayan popularly known as Media Crooks vented his anger on this move of the Finance Ministry. He did not mince his words… “This is shameful,” he said directing his Tweet to Prime Minister’s Office. His apprehension was right. This move would directly hit small businesses who can’t afford high value advertisements in TV and Print. Link of the Tweet: https://twitter.com/mediacrooks/status/741158250419228672

Journalist J Gopikrishnan, who is also a blogger Tweeted: “Instead of imposing petty cess, the Government must collect tax evasion of Rs.30,000 crore by six telecom companies.” He pointed out a report on huge tax evasion by telecom companies unearthed by CAG. Now the Public Accounts Committee of Parliament has summoned Telecom and Revenue Secretaries for not taking action to collect the huge evaded money by telecom operators.

Link of the Tweet: https://twitter.com/jgopikrishnan70/status/741195355467845633

Here is the email received from Google’s Payments Division to bloggers and online advertisers on June 10 :

………………………………………………..

Hello,

This is to inform you that as per the Notification No. 37/ 2016: F.No.
370142/12/2016-TPL dated 27 May 2016 read with Finance Act, 2016,
Government of India has levied an ‘Equalisation Levy’ on provision of
online advertisement services or any other service or facility for the
purpose of online advertisement by a Foreign Company provided on or after
June 1, 2016 to specified customers in India. The applicable rate of the
levy is 6% of value of fees for providing online advertisement or related
services.

As you are aware, the terms and conditions applicable to AdWords require
customers to bear any tax or Government charges on the services availed of
by them.

Accordingly, with respect to invoices raised by Google for online
advertisement and service for the purpose of online advertisement provided
on or after 1 June 2016, you will need to deposit 6% Equalisation Levy (as
applicable).

The Google Payments Team

© 2016 Google Asia Pacific Pte. Ltd., 8 Marina View, #30-01, Asia Square 1,
Singapore 018960

You’ve received this mandatory service announcement email to update you
about important changes to your account.

………………………………………………………………………………………………...

Like the previous two unsuccessful attempts by the Finance Ministry to levy taxes, will this too bite the dust? We are now having Cess on all kind of transactions like Cess for Education, Road Safety, for welfare of farmers, agriculture and lastly, even for Swacch Bharat.

While Prime Minister Narendra Modi is advocating Startup India and Make In India, Ease of Doing Business projects, this new cess runs counter to his efforts. Will the Ministry see clear through this and repeal it? Only time will tell.

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