Google Tax, Amazon Tax or Facebook Tax: A New Tax In India, All might not be aware about this, but in the current Union Budget of 2016, Finance Minister has proposed to levy a totally different and unique tax in India which is basically known as Google Tax. A committee which was formed for the taxation of e-commerce transactions gave the report to finance minster for new levy to 13 new services, which includes online advertisements and cloud storages.

Google Tax, Amazon Tax and Facebook Tax

Google Tax, Amazon Tax and Facebook Tax

What is Google Tax ?

Google Tax is the tax on the online services which would be provided by the nonresident foreign companies to the Indian citizens for availing services and with holding the tax of 6% as equalization levy on the gross amount and deposit the same to the government. The entities which doesn’t have permanent establishment in India and where the total payments to the foreign entities, exceeds Rs. 1 Lakh, than Google Tax would be deducted.

Which services are included in it ?

All the services which are performed online such as online advertising, distributing digital content, downloading videos or music, downloading e-books or PDFs, e-commerce transactions, online new reading, online search engine, online maps, online software applications. It should rather be noted that this is just and illustrative list and the ambit of this tax would be increased further.

Why such Tax ?

It is but obvious that the question will come in your mind that what is the need for levying such tax; the only reason to levy such tax is to bring the big companies like Google or Facebook under the ambit of Law. These companies are earning huge income by way of advertisements and other sources but are not paying single tax as they have routed the income through tax haven countries.

Analysis or Effect of Google Tax:

There should be question in mind that how the Google Tax would be calculated. There are two alternatives available. Any of the two can be adopted.

  1. If the services rendered by the foreign entity amounted to Rs. 5,00,000. Then the Google Tax on that amount would be Rs. 30,000 (Rs. 5,00,000 * 6%). Now the remaining amount of Rs. 4,70,000 should be paid to the foreign entity. Here the foreign entity has to bare loss of Rs. 30,000.
  2. If the foreign entity is not ready to bare the loss of Rs. 30,000, than the individual has to bare such amount. So the Indian citizen would be paying Rs. 5,00,000 to foreign entity and Rs. 30,000.

Here the purpose would be to tax the big giants. But the foreign entities do not accept the proposal than the tax liability would be on the small entrepreneurs and startup which takes the services from the foreign entities to earn the name.


Consequences of not deducting or depositing:

If the Indian citizen is unable to deposit the said tax to the government or tries to evade the tax, then as per the proposed levy, the expense would not be allowed as expense while calculating the taxable profit.

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Latest Comments

  1. We are a private limited company and taking hosting service from Amazon and advertisement service from google and Facebook but we are unable to deduct his TDS, so we are depositing his TDS from own pocket. Can you tell me how we can claim TDS from them or we have to do something else process.

    • Dear Sir,

      Thanks for your comment. As I have already mentioned, that if the service provider party does not accept to take the tax risk, than you have to definitely pay from your pocket. Try to negotiate with the providers.


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