The government has so far collected around Rs 4,000 crore from Equalisation Levy since its introduction in 2016-17. Collections in 2019-20 were around Rs 1,000-1,100 crore, said two sources close to the tax department. The Equalisation Levy, a 6% tax on revenue earned by non-residents from online advertising and related services, was first introduced from 1 June 2016. In the 10 months during that financial year, the total collection was around Rs 350 crore.
Equalisation Levy, popularly known as the 'Google Tax' or 'Digital Tax', was the first step by the government to tax India revenue of foreign firms with no permanent establishments in India. The need to tax digital companies likes Amazon, Google and Netflix arose because these companies collect digital revenues from countries where they do not have significant business presence.
Countries across the globe felt the need to tax revenue generated by such companies in a particular jurisdiction, and hence under the aegis of OECD, they started the talks to formalise a framework on what and how to tax revenues earned by such companies in a country in which it has no physical or significant presence.
India became one of the first countries to introduce digital tax in any form in 2016. The government has now expanded the scope of Equalisation Levy, and has imposed a new 2% levy on sales of goods and services in India by overseas e-commerce operators.
For many experts India's move to introduce Equalisation Levy as early as 2016 was more a policy statement rather than another source of revenue generation. However, they feel the government's recent move to expand the scope of Equalisation Levy that to in a 'rush' - no such provisions were part of the Finance Bill presented with the Budget 2020 - stems more from revenue concern as it sees a sharp drop in other tax revenues due to lockdown and spread of coronavirus.
The new 2% levy came into force from 1 April 2020 and the first quarter taxes were supposed to be paid by 7 July. Sources from tax department said that they are yet to receive full details of the collection from banks.
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