Google tax mop-up rises 64%, Bengaluru and Hyderabad top the list

Even as the US threatened retaliatory tariffs against India’s digital services tax, the collection of equalisation levy (or the so-called Google tax) saw 64 per cent growth after the third instalment deadline on Thursday. 

This complements improvement in direct tax collection, with contraction narrowing to 9.6 per cent as on January 7, against a double-digit decline seen till last month.

The digital levy, aimed at taxing non-resident e-commerce operators, mopped up Rs 1,436 crore after the third quarter (Q3), against Rs 877 crore collected in the same period last year, said a government official.

While the levy applied only to digital advertising services till last year at the rate of 6 per cent, the government widened the scope to impose 2 per cent tax on non-resident e-commerce players with a turnover of Rs 2 crore from April 1, 2020.

It covers players, including Adobe, Uber, Udemy, Zoom.us, Expedia, Alibaba, Ikea, LinkedIn, Spotify, and eBay.

Direct tax, net of refunds, stood at Rs 6.32 trillion as on January 8, compared to Rs 6.99 trillion in the corresponding period last year. The contraction in the collections narrowed to 9.6 per cent, from 13 per cent as on December 16.

“Collections have picked up pace, in line with the overall economic activity. We hope to match last year’s collection in direct taxes of Rs 10.53 trillion. It maybe slightly higher, accounting for the Vivad Se Vishwas dispute resolution scheme collection,” said a government official.

An information technology hub like Bengaluru accounted for about half of the total mop-up at Rs 723 crore — posting a growth of 45 per cent. 

Hyderabad saw collection grow to Rs 422 crore, compared to Rs 269 crore last year — a growth rate of 57 per cent.  

Delhi posted 376 per cent growth in the equalisation levy collection at Rs 181 crore, compared to Rs 38 crore last year, while Mumbai’s mop-up doubled to Rs 82 crore over last year’s.

The office of the US Trade Representative in the Section 301 report has held that India’s digital tax of 2 per cent on technology majors is unreasonable, burdensome, and discriminatory against American companies like Amazon, Google, and Facebook, and inconsistent with international tax principles. 

It also noted that the tax was “actionable” under Section 301 of the Trade Act, which may mean retaliatory tariffs on Indian products. 

New Delhi in a statement on Thursday said it would examine the determination or decision notified by the US and take appropriate action, keeping in mind the interests of the nation.

In the first quarter, only around Rs 291 crore was collected by the July 7 deadline - a 30 per cent drop year-on-year (YoY), despite expansion of the levy, as several multinational companies had failed to comply with the stiff timeline. 

After the second quarter deadline of October 7, Rs 738 trillion was collected - a growth of 35 per cent. However, the payments kept trickling in past the deadline date.

While the direct tax target of Rs 13.19 trillion may be impossible to meet, the income-tax (I-T) department is hopeful of achieving last year’s level of Rs 10.53 trillion. 

The overall advance tax collection, including corporation and personal I-T, posted 33 per cent growth in Q3, with a collection of Rs 1.41 trillion.  

In the April-December period, the advance tax mop-up was Rs 2.99 trillion - a 6-per cent decline YoY, compared to a 25-per cent contraction seen after the second instalment in September.