The central government reportedly wants to directly tax technology companies like Google and Facebook on profits they earn locally. The government is considering a revenue threshold of Rs 20 crore and a limit of 500,000 users for taxation of companies headquartered outside India, The Economic Times reported.
The idea is part of the Significant Economic Presence (SEP) concept introduced in the Income Tax Act from April 1, 2018, the report said. India had also introduced an equalisation levy of 6%, and collections under this levy reached Rs 550 crore for 2017-18.
SEP is defined as a transaction in any goods, services or property carried out by a non-resident in India, including download of data or software in India. The Finance Act 2018 extended this to mean businesses delivered in India without a permanent establishment in the country, the report said.
The finance ministry had invited stakeholder comments and suggestions from the general public in February this year on determining the threshold for SEP and the submissions were under consideration, the report said.
The move to tax global companies, which do not report complete revenues generated in the country, will impact the likes of Amazon, Facebook, Google and Twitter, the report said.
Big tech companies do not invoice all services provided locally through their Indian entities on par with domestic firms, which are taxed at 35%.
LocalCircles, a community feedback platform, has proposed that a global corporation with over one million registered Indian users or 100 paying customers or annual revenue of over Rs 10 crore from Indian customers should be required to invoice all Indian customers from their local entity. The copy of the letter sent to the finance ministry was reviewed by TechCircle.
The news of a direct tax on big tech firms comes at a time when G-20 countries are looking at implementing digital tax on technology companies through a consensus-based approach by 2020, according to reports.