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Google, Facebook and Twitter won’t have to pay domestic tax under new IT rules

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It seems a golden time for the global tech companies including GoogleFacebook and Twitter, appointing grievance officers beneath new information technology(IT) guidelines does not suggest that they have an “everlasting institution” in India.

 

But when their native workplace performs enterprise features and contributes to the income of a father or mother agency overseas, it could appeal to home taxes stated by two folks within the income division.

 

Despite having local offices in the country, their entire income does not come under the tax net due to different tax structures under which they operate. However, they pay an equalisation levy of 6% on their advertising revenue and digital transactions.

 

At the same time, the tax department argued that the appointing of a nodal or compliance officer in India under the new rules implies the company has a permanent establishment in India, experts said. With this they should therefore pay the appropriate taxes-at least 25% but possibly as much as 42%–on the entire income generated in the country.

 

Government has to come with high level of reform measure in the paper by not just talking with the babu’s who were driving their ministry from UPA II. A question is on how they will reverse the same policy which they have made. It is definitely a tough decision but the government has to take the call at some point of time. Let’s see another instance..

 

While India aspires to become a $5 trillion economy, dependencies are high on its growth sectors. One such sector is travel and tourism, identified as an integral pillar of GoI’s ‘Make in India’ initiative, and a significant job creator.

 

According to the World Travel and Tourism Council (WTTC), tourism generated $240 billion, or 9.2% of India’s GDP, in 2018, and supported 42.67 million jobs – 8.1% of its total employment. It was also the third largest foreign exchange earner. GoI seems to understand this, and is focusing on creating and fostering tourism in different areas such as medical, rural, lighthouse and spiritual tourism.

 

But the tourism sector remains stunted due to certain onerous taxes and regulations that apply to only those who are located, and operate from, a ‘permanent establishment’ in India. Surprisingly, businesses that offer similar services but are located abroad, aren’t bound by these regulations and compliances, and customers have the option to procure the same services at much lesser costs – due to no goods and services tax (GST), permanent account number (PAN) and know your customer (KYC) requirements -from overseas operators.

 

An expert said, the Covid-19 pandemic may indeed be hitting India’s tourism sector hard. But the regulations deal a long-term blow to India-based companies, encouraging forex outflow and revenue losses for government.

 

The simplest solution for this is a centralised registration mechanism on the lines of ‘One Nation One Tax’ and ‘Digital India’. There would be no loss to state governments as operators would be charged integrated GST (IGST) from their centralised location, and revenue would accrue to the state where the place of supply would be.

 

The worldwide taxation guidelines ,significantly with respect to everlasting institutions, have been the vital space for multinationals as the principles normally name for taxing the revenue in international locations the place they create worth.

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