The Indian government has given up on imposing a digital tax: it is limited to foreign e-commerce companies with Indian subsidiaries

According to Indian media reports, in order to provide a unified scope of work, the Indian central government has decided not to impose a 2% digital tax on foreign e-commerce companies that sell goods and services in India through Indian subsidiaries.

The amendments in the Indian Finance Bill 2021 make it clear that foreign e-commerce platforms will not have to pay the equivalent of 2% if they have a permanent establishment in India or pay some kind of income tax here. However, all foreign companies that do not pay any taxes here will have to pay the digital tax.

If goods or services are sold through the Indian branch of a foreign e-commerce company, no digital tax will be required . This means that e-commerce companies like Amazon and Flipkart will not have to provide digital tax in India. It only applies to non-Indian companies with annual revenue of more than 20 million rupees and sell goods and services to Indians online.

" Through the government's amendment, I want to clarify that the digital tax will not be applicable to e-commerce companies that have their own subsidiaries in India , " Indian Finance Minister Nirmala Sitharaman said on Tuesday while discussing the Finance Bill 2021 .   “ This Indian government supports digital transactions and will not do anything to undermine digital transactions. ”

India had announced last year that it would impose a "digital tax" on these companies as they provide tax in India, while foreign e-commerce companies do not provide any income tax despite operating in India . The fee has been a controversial issue as the US claimed that it was a discriminatory move against American companies .

India defended its move, saying the fee is intended to provide greater clarity, certainty and predictability to all stakeholders on payments for digital services and incurring tax liabilities, in order to reduce tax disputes and administrative costs. The digital tax was implemented in April 2020 .

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