The Ministry of Finance (MoF) in India has decided it’s time to make global entities like Amazon, Netflix pay up for making money in the country. Service tax of 15% will soon be applicable on products that we buy online.
This means that from 1 December onwards, you’ll be paying 15% more to buy e-books from Amazon, cloud storage on Google Drive and even the Netflix subscription that gives you access to popular serials like the Stranger Things.
Why the Tax?
According to the MoF, this tax has been put into place on global companies, to give local players a level-playing field with them. And also, to tax the companies who do not have a physical presence in the country.
Moreover, services like Netflix came to India in 2016, while Apple localised its content on iTunes, Apple Music, payable via Indian currency.
Service tax of 15% will hit the prices of services offered by companies like Apple, Netflix and Google among others. These brands service their products in India, make money without incurring taxes on it.Vaibhav Jain, Senior Consultant, Tax, Ernst Young India
Vaibhav adds that at a time when the Indian government is pushing for a Digital India, the service tax move works against their objective.
The government feels that online services bought by Indian consumers are not taxed, hence the call for service tax was made.Samsuddha Majumder, Tax Partner at Trilegal
The tax will be levied on the companies, who will make these margins by asking the consumer to pay more. This activity will be undertaken by Indian subsidiaries of these companies, monitored by the taxation authorities here.
Majumder also feels that this service is a negative incentive for global brands, leaving them with food for thought on the matter in hand. Also, there isn’t enough clarity, as to which companies will be liable for these taxes. This puts small companies under threat, negating their scope to grow here.
One must remember that Service tax of 15% is different from the 6% equalisation tax, also known as ‘Google Tax’ that is levied on digital ads in India.
Also Read: Why the ‘Google Tax’ in India? Here’s Everything You Need to Know
Why the Rush?
Taxmen like Vaibhav and Majumder aren’t sure as to why the date for service tax is 1 December and not next year onwards.
But to their understanding, this might be the government’s way of letting companies sort their system out at the earliest, and making them pay up for every penny that they make in India.
This definitely has come as a sudden call. Ideally, it would have been sensible to implement this tax in the of Goods and Service tax (GST) from next year onwards. But looks like the ministry involved had other ideas.Samsuddha Majumder, Tax Partner at Trilegal
The 15% slab for service will be revised to 18% in the GST starting next year.
Majumder also talked up that India has somewhat jumped the gun with his ruling. Countries like Australia and New Zealand were expected to introduce this ruling first, but clearly, India has stolen a march on them.
Pay More Guys
Looks like demonetisation wasn’t enough of a torture on the Indian consumers that the service tax applicable on services will add further to his/her expenses. It’s certain that from 1 December onwards, to buy a Rs 250 e-book on Amazon, you’ll have to pay Rs 328.
Just what the consumer needed, added tax burdens. Give us a break already!
This ruling is not at all beneficial to the consumers. But in the long term, this industry could gain from the money accrued from these companies.Samsuddha Majumder, Tax Partner at Trilegal
In addition to consumers, few small-sized companies servicing online will have to bear the expense brunt. However, chances are they might manage to circumvent the eyes of the tax officials.
Ache din, at this juncture only looks like a myth to one and all in India.
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