Nine lobbying groups from the US, Europe, Asia, and Australia have asked India to delay the new 2% digital tax by nine months. The new digital tax will hit firms such as Facebook, Google, and foreign e-commerce transactions on sites such as Amazon.com.
This new tax system was brought into the budget in March and from April 1 it was imposed, under which 2% extra tax is charged on foreign billings or transactions where companies take payment abroad for digital services provided in India.
The nine groups, from the us , Europe, Asia, and Australia, during a joint letter to India’s minister of finance , urged to delay the tax nine months and an industry-wide consultation before implementation.
“The time frame within which this expansive new measure was approved and entered into force allowed for neither the dialogue nor the many structural changes that might be necessary (for companies to comply),” said the letter.
“India may be a critical market during which many of our members are deeply invested,” it added.
In India, many foreign companies escaped the tax system but this new tax is taxing foreign companies that have a significant local client base in India.
The tax is also applicable to advertising revenue earned from companies overseas if those advertisements eventually target customers in India. Particularly, Google and Facebook are in great concern with it.
As per the experts the tax further risks souring India’s trade relations with other countries such as the United States, Europe, Asia, and Australia.
But the facts remain that this new amendment will help India to refill its economy to some level.