Google Tax to make life more difficult for Indian startups

‘Google tax,’ also known as the equalisation levy could end up making life more difficult for Indian companies, especially startups by increasing compliance costs and throwing up new accounting hassles. This comes at a time when the government is pushing the envelope on the ease of doing business in the country, reports The Economic Times. The equalisation levy was introduced by Finance Minister Arun Jaitley during the introduction of the Union Budget 2016. It proposes a tax at the rate of 6 percent on advertising in the digital space and, online ads (You can read more about the equalisation levy in this Ernest & Young report here). When it was originally introduced, the point of the levy was to indirectly tax internet giants such as Google and Facebook, who make money off Indian advertisers. However, as per the rules announced on Monday the onus of deducting and depositing the levy will lie with the advertiser. While Google has made it clear that they will pay all applicable taxes, some Industry insiders told the news site that this may prove to be an added burden on the Indian companies as they may have to pay the additional levy from their own pockets. “It will be a situation of double jeopardy for Indian companies. They will not only have to pay an extra cost but also do more compliance,” said Subho Ray, president of Internet and Mobile Association of India (IAMAI). He told ET that the body is now seeking clarity from the government on who is supposed to finally deposit the levy. IAMAI had earlier said the levy will ‘‘cripple the startup companies’’ and raise their tax obligations by almost 50%. “The tech startups are already paying 14.5% service tax to use these ad platforms which amounts to an estimated Rs 906 crore of taxes to the government,” the association reportedly said in a statement.