Google, Facebook & Others Need To Pay 2% Extra Tax From April 1st; IAMAI Wants This To Stop

The Finance Act 2020 has been put in place from April 1, 2020, i.e., today, by the Ministry of Finance and after getting the approval of the President.

One of the amendments is that the Government has now extended the scope of equalization levy on e-commerce businesses.

This comes at a time when the entire country, including the e-commerce platforms are fighting hard to save their sinking businesses, thanks to the Coronavirus Pandemic.

Digital and Internet companies are concerned over this new cess of 2%, and have raised their voice against it. They have requested the Govt to reconsider it, especially now, amidst coronavirus outbreak.

Government Levies 2% Additional Levy On E-commerce Businesses

As per Section 165A of Finance Act 2020, an  equalisation levy of 2% will be levied on all the sales of goods and services by a foreign e-commerce company made to any Indian resident, non-residents under ‘specified circumstances’, and any person who buys such goods or services using an IP address situated in India.

The announcement hasn’t been received well by the e-commerce organizations as this will obviously add to the already stressed situation that they are facing. There are reports that reveal multinational tech firms including Google and Facebook coming together and asking the Government to defer the decision of paying the additional levy for at least six months.

IAMAI To Govt: Please Reconsider It

The Internet and Mobile Association of India (IAMAI), which represents the digital services sector in India has expressed worry over this, saying that this imposition was an unexpected move and industry stake-holders were not consulted regarding the move.

IAMAI said, “This sudden imposing of an additional levy at such times will only make matters worse, as it will require businesses to make complicated changes to their internal systems, accounting and billing mechanisms in such short notice, that too in such challenging times of lockdown and work from home, which makes it all the more arduous.”

Interestingly, this rule of 2% cess wont be applicable to those ecommerce firms, which have a physical presence in India and whose receipt from supplies is less than 2%. 

Hence, Amazon will not be charged, as Amazon India is a separate entity all-together. But Google and Facebook, along with other foreign based companies will need to shell out extra tax.

We will keep you updated, as more details come in.