India is preparing to bring Google, Facebook and Twitter under an ‘equalisation levy’

In a bid to bring global internet companies, which are believed to be avoiding taxes in India, under the ambit, Indian government is mulling to levy an ‘equalisation tax’ on them.

India thinks that Google, Facebook and Twitter, which do not have permanent establishments in the country, are making profits and they cannot also be double-taxed.

In this regard, the Indian government has found a way of earning something from the profits that these platforms have been making.

The ‘equalisation levy’ that was mentioned in the Budget 2016 will increase the cost of an array of online services.

A government-appointed panel recommended the expansion of the so-called 'Google tax'.

In a report, the eight-member committee on taxation of ecommerce proposed that services ranging from online advertising and cloud computing to software downloads and web hosting are subjected to an 'equalisation levy' of 6-8% of gross payment if the provider of the service is a foreign entity without a 'permanent establishment' in India.

"India is challenging them: If you think credit for this 6% is so important for you, and you are deriving income from India, why don't you set up a permanent establishment in India?" Amarjeet Singh, a partner at KPMG, told ET.

In the UK, 'Google Tax' is a provision that prevents technology companies from shifting profits offshore to tax havens.

While Google's revenue from India was Rs 4,108 crore in 2014-15, Facebook's topline was Rs 123.5 crore in the same period.

Singh of KPMG said that the levy could be open to legal challenge, and ultimately, the customer will have to pay the price. "It will flow down to the customer. None of these companies will say they will bear the cost," he said.