Seeking to tax overseas online companies deriving financial value in India, the I-T department today sought industry views on the income and user limits to figure out if they have ‘substantial financial existence’ in the country.
Companies like Amazon, Google, Netflix, Facebook, Twitter, provide online services and have large user base in India.
Through the Finance Act, 2018, the government had introduced the principle of ‘Considerable Financial Existence’ (SEP) in the Earnings Tax Act under Area 9( 1 )(i) for tax of non-residents in India by increasing the scope of the meaning of ‘company connection’.
The definition clarified that a non-resident’s SEP in India will constitute ‘service connection’ of the non-resident in India.
For this function, SEP was specified to indicate any deal in respect of any products, services or residential or commercial property carried out by a non-resident in India consisting of provision of download of information or software in India if the aggregate of payments occurring from such deal or transactions throughout the previous year surpasses the amount as might be prescribed.
Organized and continuous getting of its organisation activities or engaging in interaction with such number of users as might be recommended, in India through digital methods would constitute as SEP.
. The provisions of SEP were introduced by the Financing Act 2018, the thresholds to determine the SEP of non-residents were waited for and the income tax department today sought stakeholder comments by August 10 on the same.
Remarks have actually been welcomed on three elements– income threshold of deal in regard of physical items or services carried out by a non-resident in India.
Revenue threshold of deal in respect of digital products or services or residential or commercial property consisting of provision of download of data or software carried out by a non-resident in India.
Third, threshold for number of users’ with whom a non-resident engages in interaction or brings out systematic and continuous obtaining of business activities in India through digital means.
Nangia Advisors LLP Managing Partner Rakesh Nangia stated looking for suggestions of the stakeholders prior to recommending the thresholds shows the taxpayer friendly method of the government.
“Generally the limit of users’ would be in percentage to the Indian consumer base that the digital players are exploiting to earn income from India without any physical service existence.
“These provisions are targeted at the digital gamers who are earning profits from the vast Indian customer base over the digital platforms without opening a traditional shop. With the taxing mechanism in location, the brand-new and emerging organisation designs running remotely through digital medium will come within the ambit of Indian taxation, paying their reasonable share of taxes in India, Nangia said.
Ashok Maheshwary & & Associates LLP Partner Amit Maheshwari said, “It seems that the Indian federal government has actually made it clear that supply of physical items might likewise cause a SEP. Decision of SEP by number of users could lead to numerous digital business being caught in the net inspite of getting insignificant revenue from India”.
The definition of business earnings as offered through Explanation 2A to Section 9( 1 )(i) also supplied that the transactions or activities shall constitute SEP in India, whether or not the arrangement for such transactions or activities is participated in India or the non-resident has a house or workplace in India or renders services in India.