Big US tech firms such as Google and Facebook plan to seek deferment of a new Indian digital tax, which has caught them off-guard as businesses battle the fallout from the coronavirus pandemic, three industry persons familiar with the matter told Reuters.
India announced last week that, from April 1, all foreign billings for digital services provided in the country would attract a 2% tax. Foreign billings are where companies take payment abroad for a service provided to customers in India.
The tax would also apply to e-commerce transactions on websites such as Amazon.com, as well as advertising revenue earned from firms overseas if it eventually “targets a customer” in India, government said.
Executives from top technology companies got together on conference calls organised by US-India business lobby groups last week, and decided to seek a deferment of at least six months, said the three people aware of the talks. They asked not to be named as the discussions were private.
Google is particularly concerned that it will not be able to swiftly identify countries where advertising arrangements were in place to target Indian users, increasing technological and compliance requirements, as per one of the persons in the know.
“Everyone is grappling. In current downturn, focus is on protecting businesses hit,” said the person who works for a global tech firm and described the tax as a “big, big headache”.
Google and Amazon declined to comment, while Facebook did not respond to queries.
India’s finance ministry also did not respond. The extent of possible compliance disruptions caused by the tax, a so-called equalisation levy, was not immediately clear, nor was how much India could garner from the tax.