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Equalisation levy
Why is it in the news?
- Domestic Small & Medium Enterprises (SMEs) and start-ups have written to Revenue Secretary complaining about the equalisation levy.
- The SMEs have to pay the levy to foreign companies doing business in India, resulting in increased costs.
More in the news
- Many foreign companies operating in India despite having sizeable sales and marketing activities and revenues in India, continue to invoice Indian start-ups and SMEs from their overseas office.
- As a result, Indian start-ups and SMEs are required to deposit 6%equalisation levy on behalf of these foreign companies which leads to additional compliance and cost burden on the start-ups and SMEs.
- The equalisation levy, introduced in 2016, is a direct tax on payments made by residents to non-resident companies for online advertisement.
- As it is a levy, the SMEs and startups are unable to claim Input Tax Credit for this cost incurred.
- In order to rectify this, the start-ups have requested the government to mandate that any global corporation having sales and marketing operations in India must be required to invoice their customers in India from a registered entity in India.
Source
Indian Express