The The equalisation levy aims at bringing internet giants such as Google and Facebook under the tax net for the money they make from Indian advertisers.
Startups that are already facing cash crunch say this will further dent their coffers as Google and Facebook will then charge extra from them.
Nitin Gupta, CEO at PayU Money, told ET the levy has come as a burden for small companies.
“The big internet platforms will definitely pass on the additional cost to companies - making it more expensive for Indian companies to advertise online - since there is not many alternatives available for the advertisers,” Gupta told ET.
“It will be a situation of double jeopardy for Indian companies. They will not only have to pay an extra cost but also do more compliance," Subho Ray, president of Internet and Mobile Association of India (IAMAI), told ET.
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On the contrary, Upasana Taku, director of mobile wallet player Mobikwik, told ET the tax will bring in clarity regarding payments to international entities.
"Wiring money to the international accounts of these firms requires a lot of paperwork and rises many questions by the auditors regarding tax compliance, etc.," she told ET, adding “the tax makes sense since India is the last big open market for these companies. These behemoths are making tonnes of money working in India, so ideally, they should contribute something by way of taxes to the country.”