The Indian government so far has collected an amount of Rs. 4,000 crore from Equalisation Levy, since it was first introduced in the year 2016-17. Under the same Levy, collections in the year 2019-20 alone amounted to an estimate of a whopping Rs. 1,100 crore.
The Equalisation Levy is a 6% tax that is paid by non-residents, upon revenue that they receive through online advertising and other related services . It was introduced on 1st June, 2016. In the remaining 10 months of the same year, the tax collected amounted to a total of Rs. 350 crore.
Equalisation Levy, which is popularly called the 'Google Tax' or 'Digital Tax', was the first step taken by the government to tax Indian revenue of foreign firms, that otherwise have no permanent establishment in our country. This was needed because digital companies like Google, Amazon, Netflix etc. collect digital revenues from countries where they do not have any kind of significant business presence.
This need was not just felt by India but also by many other countries across the globe. Hence, under the support of OECD (Organisation for Economic Cooperation and Development), they started formal talks to formulate a proper framework on what and how to tax such revenues earned by such digital companies from countries where they have no physical or significant establishment.
Following this, India became one of the first countries to introduce such a digital tax in any form in the year 2016. Now, the government has even extended the scope of the Equalisation Levy, by imposing a new 2% tax on sales of goods and services in India by overseas e-commerce platforms.
Experts say that when India first implemented the Equalisation Levy, it was more of a policy statement than just another source of revenue. However, they feel that the government's recent move to expand the scope of the Levy, was made in a rush, since no provisions or warnings were made for the same in the Finance Bill presented with the 2020 Union Budget. This move, according to them, stems from revenue concerns, because the government has seen a sharp drop in other taxes due to the pandemic-induced lockdowns.
