Downloading apps may cost money with 'Google tax': Report

After the application of equalisation levy on online advertisements, media reports say that the government is mulling over the option of widening its scope.

According to an Economic Times report, the government might impose a six per cent tax levy on all online multinational companies that earn revenue from India, this could include even the downloading of apps on smartphones.

At present, there is no such procedure in any other country of the world, which means that these firms do not have any other way to claim credit and they might pass the cost on their customers and advertisers.

India became the first country to impose equalisation levy, popularly being called Google Tax which had impacted Indian businesses who use online platforms of foreign digital companies like Google, Amazon, Facebook, etc to advertise their products.

The Government decided to impose a 6 per cent levy on any payments made by Indian businesses for advertising in websites of foreign companies that are not permanent establishments.

The equalisation levy was a part of the government's move to tax companies like Google, who were making significant earnings from India but were not paying the income tax. The reason being that these companies do not fulfil the criteria of a permanent establishment, commonly defined as a 'fixed place of business' in a tax territory.

For example, if Google charges Rs 100 from an Indian company for advertising on its website, the company may have to issue a cheque of Rs 106.38 in the name of Google so that after withholding a 6 per cent tax, Google gets Rs 100.