Exclusive | Govt stands defiant, rules out rollback of digital tax

The government has received requests for a rollback on digital tax by the industry but it would not be considering any such proposals.

"Of course, we have had a lot of presentations by stakeholders and a lot of discussions on the same with them. But there is no way we would be in a position to consider them," a senior government official told Moneycontrol.

India introduced a digital tax called equalisation levy in 2016 at the rate of 6 percent. Initially, it was payable by Indian residents on online advertisement services purchased from non-resident companies.

From April 1, 2020, the scope of equalisation levy has been expanded to include a 2 percent levy on all online sale of goods or services into India by non-resident e-commerce operators.

"It is a valid tax that covers all foreign companies and doesn't single out specific countries. There's no reason for India to budge on it," the official said.

In June, the US initiated investigations into 10 nations and blocs, including India that have imposed such taxes or are in the process of doing so. The countries include the UK, Brazil and the European Union.

Following India's levy, the US decided to start an investigation under Section 301 of the Trade Act, 1974, into the digital services taxes that have been adopted or were being considered by a number of countries, including India, to 'unfairly' target American tech companies.

A similar tax was announced by France on digital companies in 2019. In protest against the same, the US administration has announced on July 12, 2020, that it will impose a retaliatory 25 percent tariff on handbags and cosmetics imported from France within the next 180 days.

"E-commerce operators have argued that they were left with very limited time to understand and prepare for the impact of such a broad-based levy on their businesses or plan its compliance. Compliances required businesses to evaluate various aspects such as pricing and making changes to billing systems, renegotiating contracts, etc," Rohinton Sidhwa, Partner, Deloitte India, said.