India's New E-Service Tax Daunts Content Providers
BENGALURU: While the whole nation is still trying to come to grips with Modi Government’s demonetization drive, there’s a semblance of flurry in India’s e-Commerce industry. It’s all about a new move of potentially huge taxation for the government that could ruffle feathers of giants like Amazon and Hungama.com.
According to the notifications issued by the Central Board of Excise and Customs, it will become mandatory for consumers to pay a 15 pct service tax on software applications, e-books, music, movies, or any such downloaded content, if the supplier is overseas. This move will take effect from December1, 2017.
Now, there are two facts that come to light— One, India’s smartphone reach is around 30 pct which implies a potential taxpayer base of 300 million people for the Modi government. Secondly, the game is now shifting worldwide to membership based services from leading companies such as Apple, Gaana.com, Wynk and Amazon among others, and this means huge revenue for the government.
But the question still lingers that, does the new service tax put domestic suppliers at an advantage? The answer seems to be ‘No’ as it only provides a level playing ground for the players.
The key point in this new taxation scheme is that it seems more as an effort to check an anomaly between domestic and overseas content suppliers and also create a new opportunities for revenue in addition to a levy to crack down on tax avoidance.
With all said and done, consumers seem to be at the receiving end and will bear the brunt of this new service tax, as there are niggling questions remain on what happens to tourists and other travelers in India who download content from overseas.
The scheme seems to be a complicated one, as content providers, service providers and others work as a team and this old fashioned way of treating content akin to goods will do much more harm than good.
The game seems to be a complex one because in a connected world where storage, content and various service providers work as teams, the old-fashioned logic of treating digital content akin to manufactured goods will do much more harm than good.
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