–Harinder Salwan
It might not be a day-dream if I imagine a day where every tax payer in India might get glued to the financial dailies to know the latest rate of taxes-much similar to what they do in stock market. The latest addition in the family is the equalization.
Digital India was announced over a 1 year ago before elections in 2014 and it was promised that it will break all boundaries and we will be able to reach out anywhere any place using the Digital tools viz – a internet connected device to reach anywhere using the internet channel and we saw a lot of applications and initiatives coming over the few months since it was announced. Today all the world leaders have dropped by and whether it is an Apple, Facebook, Google or Microsoft or any other working in the digital world promised to make the dream of the dreamers a reality.
Suddenly today the notification is announced which will cover internet advertising and will be affecting companies like Google and Facebook who will face a 6 % tax on them and like it happened when Service Tax was first introduced it covered only a handful of areas and today there is just a handful of services in the negative list now which are out of its ambit.
We are looking forward to a day soon perhaps even early next year when we find that the government has kept the option of adding more services under the Equalization levy which they can add any time and soon you should not be surprised when it comes on all digital services / cloud services and you can only dream of the options that the department of finance can tax and the software industry which is yet waiting for the promised GST to save it from double taxation and it should not be surprised when they are also brought under this tax.
Swacch Bharat CESS did not allow you to take input credit and it was 0.5% of the value of services in other others 50 paise of your
profit you pay anyway straight to the government to keep the country clean. So every level that the service passes the provider is paying 0.5% of his profit to the government to keep the clean mission on. In simple terms, for an INR 100 margin today we are paying 14 rupees to the government in other words 14% of your profits.
To add to this starting 1st June now we have Krishi Kalyan CESS allowing you to get input credit and we have to pay .5% of the profit that we make to the government again. In the industry that we deal in viz Software we also have to pay VAT which varies from 5 % to 5.5% in the various states and we end up paying a tax of 20.5% average and then are exposed to the customer who is going to deduct 10 % TDS on your services in some cases like professional and not forgetting the Withholding tax that the software importer is paying which varies from 10 % to 30 % in some cases and if we consider average 20 % we are paying approx. 50 % taxes to be in the domain of digital technology.
Where are we heading to and the day is not far when it will make us pay for paying everthing that someone else uses then are we really living in a world which we can say is going to make life easy – Digital world.
(The author is the CEO of Tricom Multimedia and is an expert in software taxation representing various governments. Views expressed are his own)