There are millions and millions of applications on the App Store and Google Play Store, which is being downloaded by many across the globe. These mobile applications on both iOS & Android platforms could get costlier soon. Yes, these apps that can be bought from the App Store and Google Play Store are going to experience a price hike, thanks to additional taxes as the government is looking to include them under the ambit of the equalization levy by the end of December.
In case you don’t know, an equalisation levy of about 6% is currently applicable on online advertisements on multinationals registered outside India. The impact of the levy on app prices may be as much as 7-8% due to this grossing up of taxes. This tax on cross-border digital transactions, will not only be next applied to mobile applications bought from companies such as Apple and Google, but other digital transactions could be brought under its purview at a later stage.
A committee constituted by the Central Board of Direct Taxes (CBDT) had suggested something similar, so this move may not come in as a surprise for this industry. The move comes as multinationals have just started paying these Levy. However, there is no response from the India’s competent authority for international taxation.
According to experts, the Government would only need to issue a circular to cover apps as the first round of guidelines kept the term “digital transaction” open ended. But there is a concern in some that TV advertisements on international channels may be included too. According to a report, about 33% of major Indian companies advertise on multinational online platforms. As many as 80% of them are hoping the equalization levy is made part of tax treaties India has with other countries.
However, there is also a view that multinationals, especially those in the digital economy, should pay their rightful share of taxes, which makes sense. Let’s see what the outcome of this is going to be. Looks like much more complicated scenario, but expect some news on this soon and stay tuned for that.