Digital India

Be ready to pay taxes for emails, blogs, downloads!

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Online TaxMonths after the government sided with ‘Net Neutrality’, it is believed to be in the final stages of a plan to impose an ‘ecommerce levy’, which will tax day-to-day online activities, like sending and receiving emails, downloading content and blogging.

According to news appearing in a section of the press, a special committee formed by the Central Board of Direct Taxes (CBDT) has forwarded a proposal to slap 6-8% tax on 13 such online activities, which has been strangely clubbed with the ecommerce industry. In case the government goes accepts these recommendations, then the future of Digital India campaign can be marred with heavy taxation on these online activities which we had taken for granted since long.

The committee formed by CBDT has cited the traditional ‘Base Erosion and Profit Shifting’ guidelines of the Organisation for Economic Co-operation and Development (OECD), using which this new special 6-8% tax on digital activities has been recommended, according to media reports.

Digital advertisers and digital advertisement companies like Google and Facebook would be heavily influenced by this tax, as the government will anyways charge the current 6% equalisation tax on them. It will be over and above the existing equalisation tax.

As per the recommendations, the activities likely to come in the tax net include:

  • Designing, developing websites for clients (domestic and international)
  • Digital advertisements
  • Digital tools/software used for TV/Radio advertisements
  • Websites which provide space for advertisements
  • Emails, which are sent/received for commercial activities
  • Online content used for commercial purposes or recreational purposes wherein digital advertisement can be implemented
  • Online computing, blogging, online data or any activity related with digital medium
  • Any provision/service used for uploading, sharing, storing or distributing digital content
  • Downloading music/videos
  • Downloading games and software/tools from Internet
  • Facilities for collecting online payments/wallets

However, as of now it looks like only B2B activities has been recommended for taxing, not the B2C ones. But in the online world, many a time it can quite difficult to determine which activity can be described as B2B and which is B2C.

So, let’s keep our fingers crossed until a formal announcement in this regard.

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