Last year PM Narendra Modi has started “Digital India” program to with an aim to reform governance through technology. And now, The Google Tax was brought in by the Finance Minister of India, Arun Jaitley in the Union Budget 2016. It was reported to launch a new kind of tax in India, which is directly known the e-commerce companies. It is a tax applied on the income and it will be increased to a company outside of India.
The companies will be e-business organizations. However, it is known as Google Tax around the world, yet in India it is known as the “Equalization Levy”.
This tax is effective from 1 June’16, the equalization levy is expected at indirectly taxing Internet firms like Google, Facebook, Linkedin, and Twitter who profit from Indian marketers.
What is this Google Tax?
As per the Budget declaration, any individual or entity that makes an installment surpassing Rs 1 Lakh in a financial year to a non-resident technology company will now need to withhold 6% tax on the gross sum being paid as an equalization levy. It is known as Google Tax
This law is applicable when the installment is made to organizations that don’t have a permanent establishment in India. This tax is just appropriate when the installment has been made to benefit certain B2B services from these digital companies.
This particular tax service includes internet marketing, provision for digital advertising space. The government can add some other site to the levy.
The main idea behind this project is to circuitously put a tax on the web mammoths when they profit from the Indian marketers. The government will impose a tax on the installments of the promoters.
Why has the tax been presented?
The tax has been presented at technology organizations that profit through online commercials. Their income is generally routed to a nation free of tax. This revenue will bring these e-commerce companies under the tax radar in India.
With this new tax, India has additionally joined the rundown of other Organization for Economic Cooperation and Development (OECD) and European nations where a comparable tax is as of now set up.
Google Tax Impact on Business Owner
Are you a business owner whose running a small business or an online start up? If yes, then Google Tax will impact you. Business owners or startups can use Facebook or Google for advertising and marketing promotions to boost up their business.
At a quick look, you may feel that it might not have any impact on you, but if you are one of those entrepreneurs who are running any SMEs or an online start-up and wishing to use Facebook or Google for your publicizing and marketing promotions then you will be affected by this Google tax.
For example; Let’s suppose you run an organization and need to pay Rs. 5 lakhs to a foreign company for using their online ad benefits like the way many of the populace use Google ads or Facebook ads.
With the new tax set up, you have to withhold 6% of Rs. 5 lakh i.e. Rs. 30,000/ – and need to pay the equalization of Rs. 4,70,000/- only. Google tax of Rs. 30,000/ – should be paid to the legislature.
Presently, this should be seen that whether the foreign organization will bear the loss or will they build their cost by netting up this tax sum, if that is going to happen then the misfortune will be borne by the Indian entrepreneur.
It implies that the overall billing of a business owner will shoot up by an extra 6% Google Tax and thus he have to pay Rs. 5 lakh in addition to charges i.e. 6% charge (so in all Rs. 5,30,000/-). So it remains to be seen that who will bear the real misfortune, a foreign online advertising company by simply accepting lower margins or they may simply add a higher promoting rate to considers extra google tax?
Business Owners/ Digital Marketers might Face Problems
No doubt, business owners and startups can get the best out of this new tax, but they might get hurt by facing new problems. As they were paying money to the foreign tech organizations, it was expected that they pay a certain amount of the money to the government as well.
Worldwide digital marketing firms will settle on a business decision in the wake of measuring their alternatives. Thus, there is no surety that the efforts of the government to drive firms to open their shops here will work.
Advertisers at home are trusting that Facebook, Google will bear the overburden, but this may simply be pie in the sky considering.
If they can stand to start a shop here, they will do. Else they will continue paying the 6% tax. But, cash-strapped government won’t continue increasing the upper limit to profit from the online ads.
Google Tax Impact on Digital Marketers
Digital advertisers and agencies will be eager to see whether the new tax will affect the advertising rates or not, that they pay to Google.
For instance, would Google pass on this expense to advertisers by rising CPC rates on AdWordscampaigns? If the cost is passed on, this is prone to have a significant impact on the advertising budgets of businesses crosswise over Australia.
Google says that in 2015, its workforce developed to around 1200 individuals in Australia and the company put more than $400 million in its Australian operations. If this new tax urged Google to close down operations and move seaward, it could have critical results for Australian advertisers and agencies alike.
In concluding lines, there is a lot of concern about the newly introduced Google Tax. It has attracted many people within the country, but business owners are disappointed with this project as it compels them to pay more than their previous payment. Any individual who makes a payment of more than 1 Lakh in a single financial year to a foreign company will now be obliged to hold back 6% tax on the total amount.