06/12/2020
The government has introduced measures to tax digital transactions in India. Further strengthening BEPS Action Plan 1, the Government of India (GoI) has introduced various measures such as the introduction of an equalization levy (EL) on online advertisements at the rate of 6%, and EL on e-commerce operators at the rate of 2%; introduction of provisions relating to the significant economic presence (SEP); withholding tax on certain e-commerce transactions; and inclusion of digital supplies in the scope of the Goods and Service Tax. With the introduction of a multilateral instrument (MLI) from April 2020, implications of the Principle Purpose Test (PPT) and the new preamble in the covered tax treaties will have to be taken into account by companies in addition to the evolution of regulations around data localization laws, e-commerce policy, etc., while identifying the right business models for operations in India.