Mumbai
The Government of India will remove “Google Tax” from foreign companies from April 1, which earn money through digital advertisements. This means that now companies like Google and META will have to pay less tax on their services in the Indian market. These companies will benefit greatly from this change, because now they will have to pay less tax beforehand, so that they will be able to increase their business further.
What was Equalization Levy?
The Government of India called this tax “Ecqualization Levi”, which was implemented in 2016. This tax was imposed on foreign companies that used to provide online services to Indian users, such as advertising, shopping, and cloud services. From this it was ensured that foreign companies became part of the Indian tax system and tax on the business done by them in India.
How will these companies benefit?
Now this 6% tax will be removed, which will give companies a chance to make their services prices more flexible in the Indian market. With this, these companies will get an opportunity to increase their operations in India and they will be able to strengthen their position in the Indian market. These companies will now have to pay less tax on income from their digital services in India. This will reduce their total tax bill and they will be able to use more part of their income for their investment or growth. This tax deduction is a major relief for American companies such as Google and Meta, and this may increase the chances of further investment and development in the Indian digital market.
Sudhir Kapadia, senior EY, told the Reuters that this fee is a smart step of the government, as the collection was not very much and it was a matter of concern for the US government. This step is being seen as an attempt to prevent further trade disputes and maintain a stable business environment.
Reducing advertising costs on platforms like Google and Meta is expected to boost more spending on digital advertisements by Indian businesses, resulting in more advertisers on these platforms and their revenue will increase. Apart from this, this step is likely to improve the profit for these technical companies.
This decision is also expected to bring more foreign investment in India’s digital sector. By making digital advertising cheaper, the government expects to promote digital economy and provide opportunities for development and innovation.
Along with removing tax, the government is also planning to cancel some already available tax exemption to foreign tech companies. Although tax will be removed, these companies can still be taxed under other provisions, which will maintain a balanced tax.
