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  • Jul 13, 2021
  • Digital Taxes | Uncertainty shrouds India’s equalisation levy

    On July 1, the Organisation of Economic Co-operation and Development (OECD) adopted a high-level statement containing an outline of the possible solution to address the tax challenges arising from the digitalisation of the economies. India, which is a signatory to the statement, has been consistent in its stand to equitably tax the digital economy.

    With the advent of the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government in 2014, India’s pitch for accelerated digitalisation was evenly matched with its quest to tax the growing digital economy, primarily driven by the fact that despite being one of the largest markets, most of the technology giants did not pay income tax in India.

    India’s First Move

    While a consensus eluded the major nations on the appropriate manner of taxation of the digital economy, India, introduced a new concept called the equalisation levy (EL) in the 2016 Budget. India and Israel were among the earliest countries to unilaterally levy a digital tax on the foreign companies. India levied a 6 percent tax on the B2B online advertisement revenues of the foreign e-commerce companies.