Google Payments: Notification regarding Equalisation Levy

Google Payments: Notification regarding Equalisation Levy

Google has sent the below news letter to all india adsense subscribers in the subject of “Google Payments Notification regarding Equalisation Levy”. Now adsense users are in the hurry to know the exact meaning of the above Equalisation Levy.

6% Equalisation levy / Google Tax comes in force from 01.06.2016


This is to inform you that as per the Notification No. 37/ 2016: F.No. 370142/12/2016-TPL dated 27 May 2016 read with Finance Act, 2016, Government of India has levied an ‘Equalisation Levy’ on provision of online advertisement services or any other service or facility for the purpose of online advertisement by a Foreign Company provided on or after June 1, 2016 to specified customers in India. The applicable rate of the levy is 6% of value of fees for providing online advertisement or related services.

Google Payments Notification regarding Equalisation Levy
Google Payments Notification regarding Equalisation Levy

As you are aware, the terms and conditions applicable to AdWords require customers to bear any tax or Government charges on the services availed of by them.

Accordingly, with respect to invoices raised by Google for online advertisement and service for the purpose of online advertisement provided on or after 1 June 2016, you will need to deposit 6% Equalisation Levy (as applicable).

The Google Payments Team

© 2016 Google Asia Pacific Pte. Ltd., 8 Marina View, #30-01, Asia Square 1, Singapore 018960

You’ve received this mandatory service announcement email to update you about important changes to your account.

The government has found a way to indirectly tax companies such as Google and Facebook, a development which could set the stage for taxation of cross-border digital transactions and potentially drive up costs for advertisers.

Instead of a straight tax on digital advertising platforms, the government has come up with what it calls an “equalisation levy” of 6% on the fees that advertisers pay.

The ‘equalisation’ happens because the government is supposedly levelling the playing field and making companies such as Google and Facebook pay for the money they make from local advertisers.

The nub of the issue is that multi-national digital platforms don’t have “permanent establishments” in the country, which would make them liable to pay tax in India. And they cannot also be double-taxed, which means that the government has had to find a way of earning something from the profits that these platforms have been making.

In his Budget speech on Monday, Finance Minister Arun Jaitley said that payments of over Rs 1 lakh a year for online advertising to “foreign ecommerce companies” without permanent establishments would attract a levy of 6%. What this means is that depending on bargaining power, the burden would have to be borne by Google et al, the advertiser, or both.

Google’s revenue from India was Rs 4,108 crore in 2014-15, according to disclosures by the company. Facebook’s top line was Rs 123.5 crore in the same period.

Google said it is reviewing the proposed levy. Facebook, Microsoft, Yahoo and Twitter did not respond to email requests for comment. The Internet and Mobile Association of India, the industry body representing internet companies, said it is “looking into” the impact of the levy with member companies.

The issue of taxing companies such as Google has been vexing tax authorities in several countries, and recently erupted into a controversy in the United Kingdom.

By completing its transaction in the Irish capital Dublin instead of in the UK, Google was paying negligible amount as tax in a country where its revenue topped $6.5 billion. Recently, the US-based search giant agreed to pay $185 million in back taxes to the UK.

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