Side-Effects of Digital India – Emails, Blogs, Downloads Shall be Soon Taxed Under Ecommerce Levy

Online Internet tax Taxation

What is the common theme between tax and friction? Both are necessary evils which we, human beings need to embrace and live with.

In a decision which can have far reaching consequences, Government is all set to brutally execute a special ‘ecommerce levy’ which will tax simple online activities such as sending and receiving emails, downloading content and even blogging.

A special committee formed by Central Board of Direct Taxes has recommended 6-8% tax on 13 such online activities which has been strangely clubbed with the ecommerce industry. In case Govt. accepts these recommendations, then the future of Digital India campaign can be marred with heavy taxations on these online activities which we had taken for granted since long.

Note here: This special tax on digital activities and ecommerce is up and above 6% special tax on digital advertisements which Govt. has already approved. We had termed this as anti-Digital India move.

At a time when states like Uttranchal, UP, Assam and others are imposing additional tax on ecommerce transactions, this new tax diktat isn’t just bad news; it’s actually scary.

The Logic Behind This New Tax

The committee formed by Central Board of Direct Taxes has used 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 suggested to the Govt.

Digital advertisers and digital advertisement companies like Google and Facebook would be heavily influenced by this tax, as Govt. will anyways charge 6% equalization tax on them.

Which Digital Activities Would Be Charged?

As per the recommendations made by this special committee, the following are the activities which can be taxed from now on:

  • 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

There is a silver lining to this though, if you may call it – only B2B transactions/activities has been recommended for taxing, not B2C. But in the online world, where rules of doing businesses is changing, it can be a massive task to determine which activity can be described as B2B and which is B2C.

More information is awaited in this regard, as the Govt. is considering the recommendations; and a formal announcement would be made soon.

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