New Delhi: The 'Google Tax' or 'Facebook Tax' was first announced in the FY17 budget by Finance Minister Arun Jaitley. This tax will be levied from June 1. It will apply to payments for all online advertisements made by Indian business entities to non-residents, where the collective payment in a financial year to a non-resident surpasses Rs 1 lakh. This will mainly affect popular tech giants Google, Yahoo, Twitter and Facebook.
Here is everything you need to know about it:
What is Google Tax?
According to the Budget, any person or entity that makes a payment, which exceeds Rs 1 lakh in a financial year to a non-resident technology company, will now need to take 6% tax on the gross amount that is being paid. The rule will be applicable when the payment is made to companies that don't have a permanent establishment in India. Also this tax will only be applicable when the payment is done to avail certain B2B services from the companies.
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Who will fall under this Google tax pay?
Currently services that include online and digital advertising will be included. Also it will drastically impact many business owners, especially running a small business or an online start up where you use Facebook or Google for advertising and marketing promotions. In this case the Google Tax will impact the business owner.
What happens if company fails to deduct Google tax?
According to the rules if any Indian business owner or company fails to deduct this tax, then the company will not be allowed to consider the expenses in calculating taxable profits. This will definitely increase the taxable income, thus adding on to the company's tax liability.
