{"id":116461,"date":"2021-07-05T20:17:24","date_gmt":"2021-07-05T14:47:24","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=116461"},"modified":"2021-07-06T13:25:16","modified_gmt":"2021-07-06T07:55:16","slug":"indias-oecd-tax-deal-may-have-revenue-implications-say-experts","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/indias-oecd-tax-deal-may-have-revenue-implications-say-experts\/","title":{"rendered":"India&#8217;s OECD tax deal may have revenue implications, say experts"},"content":{"rendered":"\n<p><strong>Source<\/strong>: <a href=\"https:\/\/www.business-standard.com\/article\/economy-policy\/india-s-oecd-tax-deal-may-have-revenue-implications-say-experts-121070500002_1.html#:~:text=India's%20OECD%20tax%20deal%20may%20have%20revenue%20implications%2C%20say%20experts,-Dilasha%20Seth%20%7C%20New&amp;text=This%20may%20have%20revenue%20implications,Organization%20for%20Economic....\" target=\"_blank\" rel=\"noopener\">Business Standard<\/a><\/p>\n<p><strong>Relevance<\/strong>: Equalisation Levy and Global minimum Tax rate aim to tax digital services at the global level.<\/p>\n<p><strong>Synopsis<\/strong>:<\/p>\n<p>Agreeing to the Global minimum Tax rate will impact India&#8217;s Equalisation Levy and create revenue implications.<\/p>\n<h5><strong>About the Deal:<\/strong><\/h5>\n<p>India recently joined the <a href=\"https:\/\/forumias.com\/blog\/oecd-g20-inclusive-framework-tax-deal\/\" target=\"_blank\" rel=\"noopener\">OECD-G20 framework for a global minimum tax<\/a>. But the deal will bring certain challenges to India.<\/p>\n<p>Under the agreed outline of the OECD multilateral solution, a portion of profits of companies with Euro 20 billion revenues and a profit margin above 10 percent would be taxed in jurisdictions where they have sales.<\/p>\n<p>Between 20 per cent and 30 percent of profits above a 10 percent margin may be taxed.<\/p>\n<p>The pact will bring <strong>only the top 100 digital companies<\/strong> like Google, Facebook, and Netflix into the global taxation pact. So, this might have revenue implications for India.<\/p>\n<h5><strong>What India is demanding?<\/strong><\/h5>\n<p>India and other developing countries were fighting to include companies with at least Euro 1 billion in revenues as against the final proposal of Euro 20 billion revenues and a profit margin above 10 per cent. This will cover at least 5,000 global entities.<\/p>\n<h5><strong>Challenges with the deal:<\/strong><\/h5>\n<p>As per the deal, India needs to <strong>withdraw the contentious 2 percent equalisation levy<\/strong> on e-commerce operators <strong>by 2023<\/strong>. The levy will most definitely go by 2023 if the proposal comes into effect, unless India can think of some other way of augmenting the tax.<\/p>\n<ul>\n<li>The equalisation levy has a much <strong>lower annual revenue threshold<\/strong> of Rs 2 crore (Euro 0.2 million) as against Euro 20 billion agreed by 130 countries at the Organization for Economic Cooperation and Development (OECD).<\/li>\n<li>India collected Rs 2,057 crore from the equalisation levy in 2020-21, an 85 per cent growth over Rs 1,136 crore in the previous fiscal. But, the OECD deal will not give the same amount of revenue.<\/li>\n<\/ul>\n<p><strong>The background of the Equalisation levy:<\/strong><\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"wp-image-116451 alignleft\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2021\/07\/Equalisation-Levy-1.png?resize=383%2C334&#038;ssl=1\" alt=\"Equalisation Levy\" width=\"383\" height=\"334\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2021\/07\/Equalisation-Levy-1.png?w=552&amp;ssl=1 552w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2021\/07\/Equalisation-Levy-1.png?resize=300%2C262&amp;ssl=1 300w\" sizes=\"auto, (max-width: 383px) 100vw, 383px\" \/>The equalisation levy or EL was introduced at the rate of 6 per cent in 2016 for digital advertising services, which led to a Rs 200 crore collection.<\/p>\n<ul>\n<li>The scope was widened in April 2020 to impose a 2 per cent tax on non-resident e-commerce players. The scope was further expanded in the Budget 2021-22 by way of clarifications.<\/li>\n<li>In May, India also notified a <strong>revenue threshold of Rs 2 crore<\/strong> and a <strong>limit of three lakh users<\/strong> for non-resident technology firms to pay tax in India under new or revised bilateral tax pacts. This is a part of the significant economic presence (SEP) principle. SEP, introduced in the Finance Bill 2018-19.<\/li>\n<\/ul>\n<p><strong>Challenges with the Equalisation Levy:<\/strong><\/p>\n<ul>\n<li>The EL has been a bone of <a href=\"https:\/\/forumias.com\/blog\/ustr-slams-indias-equalisation-levy\/\" target=\"_blank\" rel=\"noopener\">contention between India and the United States<\/a>, with the latter deciding to impose additional tariffs on a slew of Indian imports, including basmati rice, seafood, jewellery, bamboo, semi-precious stones and pearls, among others.<\/li>\n<li>However, the tariffs will remain suspended for six months with an expectation of a multilateral solution to the issue of digital taxation.<\/li>\n<\/ul>\n<p><strong>Suggestions:<\/strong><\/p>\n<p>India will have to take an aggressive stance to protect its rightful tax base, and need to reach a fair consensus to protect the Indian tax base.<\/p>\n<div class=\"content-box-green\">\n<p><strong>Read more:<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/forumias.com\/blog\/issue-of-digital-services-tax-between-india-and-us-explained\/\" target=\"_blank\" rel=\"noopener\">Issue of Digital Services Tax between India and US \u2013 Explained<\/a><\/li>\n<li><a href=\"https:\/\/forumias.com\/blog\/base-erosion-and-profit-shifting-beps\/\" target=\"_blank\" rel=\"noopener\">Base erosion and profit shifting (BEPS)<\/a><\/li>\n<li><a href=\"https:\/\/forumias.com\/blog\/global-minimum-corporate-tax-and-india\/\" target=\"_blank\" rel=\"noopener\">Global Minimum Corporate Tax &amp; India \u2013 Explained<\/a><\/li>\n<\/ul>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Source: Business Standard Relevance: Equalisation Levy and Global minimum Tax rate aim to tax digital services at the global level. Synopsis: Agreeing to the Global minimum Tax rate will impact India&#8217;s Equalisation Levy and create revenue implications. About the Deal: India recently joined the OECD-G20 framework for a global minimum tax. But the deal will&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/indias-oecd-tax-deal-may-have-revenue-implications-say-experts\/\">Continue reading <span class=\"screen-reader-text\">India&#8217;s OECD tax deal may have revenue implications, say experts<\/span><\/a><\/p>\n","protected":false},"author":10311,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[],"class_list":["post-116461","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704744410},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/116461","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10311"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=116461"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/116461\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=116461"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=116461"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=116461"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}