(New) tax levied on all digital services?

[Acclaim9638]

I was trying to purchase a premium subscription to Nexus Mods when I saw this.

So I tried to find more details, and this is what they had posted in their forums:

I'm afraid that is correct. We have blocked payments from India for the foreseeable future.

We were contacted by your government's tax services recently telling us they have introduced a (relatively) new worldwide tax system on all digital services sold to Indian residents, even from businesses outside the country. The tax process is extremely long winded and stifling to a small business such as ours and, oddly, has absolutely no minimum earning threshold. A lot of other VAT-based tax systems have a "minimum amount" before it applies, for example, the EU's VAT MOSS tax system, which has similar principles to the Indian tax system has a minimum threshold of 10,000 euros a year, which we would be well under in India if India had such a threshold to help protect small businesses. Unfortunately, India does not have a minimum threshold and we are legally culpable to pay tax in India if a single Indian resident buy's Premium Membership on our site.

The amount we earn from Indian residents would never outweigh the cost of paying for an Indian accountant to process the tax forms and payments for us each month, nor would it be worth our time to do the work manually, so we've sadly had to block payments from India so we do not get sued by your government's tax services for breaking their rules.

It's a sorry state of affairs, and I only hope more countries don't implement these extremely complex tax systems without more protections and support for SMEs.

Does anyone know what this tax is?

 

[puns]

wait, what?

 

[lockhrt999]

Yup, a lots of digital services (who have never set foot in India) are already charging GST (in case of purchase) or deducting TCS (in case of income) for Indian govt.

 

[6pack]

Acche din. You will pay tax^n times and you will like it. Extra taxes will continue till morals improve. Don't you know only 1% of India pays taxes? /S

On a serious note, why all our past few FM's are like this? Always raising taxes on anything. Probably one day they will put tax on shitting too. Pay 1 rupees tax every time you go to the loo.

 

[enthusiast29]

This is all due to "Make in India" initiative. They really don't like Indians buying services/goods from other countries especially China, be it anything at all. They want to discourage that by putting taxes on such purchases so that the service provider either blocks Indians or has to deal with filing for taxes which as you all know is a very complicated procedure in India. On the other hand if somehow they do agree to pay taxes and keep allowing Indians to use services then some people here will see extra taxes and might avoid the purchase. In either case the Govt. of India wins by at least reducing the public which is dependent on outside services.

They hope by doing so they will encourage people of India to do something in-house.

 

[ishashank]

This is a huge ****up by the Indian govt. without setting minimum threshold and implementing taxing where it shouldn't.

Imagine if other countries implement similar type of taxation then all smaller Indian freelancers/SAAS will be out of jobs.

 

[blr_p]

wait, what?

Right, apparently we did not agree until a month ago

India won't make sovereign commitment on future digital services tax

May delay implementation of global tax deal

www.business-standard.com

I have no idea what is going on and that no one here has even heard about it means nothing is in force presently.

We want to impose these taxes in the future is the Indian position because of the below..

With the rise in digital trade, the customs revenue from physical trade is likely to reduce, leading to a significant loss of tariff revenues to net importers of physical digitisable products. Given that most net importers of physical digitisable products are developing countries, the likely revenue loss for them will be higher than for the developed countries.

https://www.orfonline.org/research/the-g20-digital-economy-agenda-for-india/

Does anyone know what this tax is?

AFAICT there isn't anything in force yet. So why has this company jumped the gun ?

 

[lockhrt999]

India exports a lot of IT related services to US. India has trade surplus with the US. In order to protect its domestic Interests, if US starts issuing their sales tax registration to Indian business and mandets them to pay and file the sales taxes to US govt 4 times a month, how would we feel about it?

UK may mandate to file its VAT. Germany will come up with something. Next thing, we will see small indian businesses would need to file a few hundred tax returns every month.

BTW, it's been going on for a few years now. Do check your digital ocean, AWS, GCP, Azure billings. Govt has mandated all business who sell anything digital to India for GST, PAN, TAN registrations.

 

[blr_p]

This equivalence tax reminds me of international call charges from the past.

It used to cost more, significantly more to call abroad from India than it cost for people abroad to call India. GOI taxed international calls more than elsewhere. Phones were a luxury, not a necessity.

As a condition to join the ITU in 1999, India had to agree to parity or equivalence. This they did reluctantly and the rest is history.

It became clear that to make up the difference they had to get more people to use phones. A phone was no longer to be considered a luxury but become a necessity for the masses.

 

[DBot]

Yeah, this’s true. I recently bought the intellij subscription and the only currency other than the first world ones was INR and they wanted to charge me 18% for it.
Instead I purchased from my friend’s address in Japan which worked out cheaper due to falling JPY even after the 10% VAT there.

 

[booo]

One more reason for me to complain about Indian bureaucracy… mera bharat mahan.

 

[6pack]

I wish I could become FM or PM for one day. I'll throw out these short sighted rules in a moment.

 

[JMak]

I had received this yesterday

Dear Customer, starting 20-Oct-22, all transactions on your ICICI Bank Credit Card towards rent payment will be charged a 1% fee.

 

[demonic]

Acche din. You will pay tax^n times and you will like it. Extra taxes will continue till morals improve. Don't you know only 1% of India pays taxes? /S

On a serious note, why all our past few FM's are like this? Always raising taxes on anything. Probably one day they will put tax on shitting too. Pay 1 rupees tax every time you go to the loo.

Shitting is part of nature and a natural process, hence a human right and cannot be taxed! But the act of cleaning after, is a different ball game, in fact that can be considered a service in itself and can be brought under the purview of GST (28% bracket sounds about right since its a luxury and only those going out to the fields are exempted).

On a different note, up to 50% of our income goes to taxes if we consider the highest tax bracket and other simplifying assumptions! Yet no development in sight, only the politicians and their aides seems to be developing.

 

[lockhrt999]

Dear Customer, starting 20-Oct-22, all transactions on your ICICI Bank Credit Card towards rent payment will be charged a 1% fee.

Me too. And I don't even have ICICICICICICI Credit Card.

 

[Mr.J]

There are many international companies who have no presence in India due to how much of a nightmare it is for them to deal with Indian government. Looks like same thing is happening in online space now.

 

[6pack]

Seems like oppo is going to start assembly of phones in Egypt and shutting their factory in India. Probably all the Chinese companies will do this.

 

[blr_p]

There are many international companies who have no presence in India due to how much of a nightmare it is for them to deal with Indian government. Looks like same thing is happening in online space now.

India's position in the ease of doing business index has gone up quite a bit since this govt took office.

What these companies want is lower taxes like they get in other places. They don't want local sourcing requirements. Apple tried these tricks earlier and didn't get very far. Others are already building here so Apple's lame excuses did not win them anything. If they expect to make use of this market then the govt thinks they should pay.

As far as digital services go they waited until a critical mass was reached and struck. Only a matter of time. Same thing going on around the world. The argument is over how much.

 

[karanssh]

Dear Customer, starting 20-Oct-22, all transactions on your ICICI Bank Credit Card towards rent payment will be charged a 1% fee.

This is probably not related to tax though, seems like all banks will follow suit and make rent payments on CCs unviable.

 

[bhp91]

And what is the government going to do if some foreign entity does not pay this "tax"? Get them extradited from their home country and take them to court?