Additional Equalisation Levy
This tax levy (burden) was invited by the tech industry themselves, through their super-smart tax planning (some may call it as evasion). Governments are forced to take actions to plug some of the holes and as an additional safeguard against BEPS (Base Erosion and Profit Shifting). I hate to admit it, but Governments are right here, they can’t simply watch as their revenue gets eroded with the economy shifting to digital.
Among many of the ‘bad’ tax ideas, I suppose this 2% Additional Equalisation Levy appears to be okay. The application threshold set by India, of a turnover of Rs.2 Crores (USD 260,000) seems to be low; and the lack of clarity whether the host countries (say USA) will approve this tax paid in India as credit under double-taxation treaties; are items that needs to be sorted out. Some weeks there was a good online seminar on this topic by Nangia Andersen India Pvt. Ltd. Yes, I need to learn more from the subject experts.
India is not alone on this. Around the world, UK, France, Spain, Austria, Czech, Turkey, Italy have been trying with their own Digital Service Tax (DST). OECD had tried Inclusive Framework but hasn’t gotten traction. UN has proposed Article 12-B income from Automated Digital Services. May be the pandemic is speeding things here. I hope the tax laws and rules for Digital will get sorted out in the coming years.