Seeking to tax overseas online companies deriving economic value in India, the income tax department today sought industry views on the revenue and user thresholds to determine if they have ‘significant economic presence’ in the country.
Typically the threshold of ‘users’ would be in proportion to the Indian customer base that the digital players are exploiting to earn revenue from India without any physical business presence.Rakesh Nangia, Managing Partner, Nangia Advisors
"These provisions are targeted at the digital players who are earning revenues from the vast Indian consumer base over the digital platforms without opening a brick and mortar shop. With the taxing mechanism in place, the new and emerging business models operating remotely through digital medium will come within the ambit of Indian taxation, paying their fair share of taxes in India,” Nangia said.
Ashok Maheshwary & Associates LLP Partner Amit Maheshwari said, "It seems that the Indian government has made it clear that supply of physical goods could also lead to a SEP. Determination of SEP by number of users could lead to several digital companies being caught in the net inspite of getting insignificant revenue from India".
The definition of business income as provided through Explanation 2A to Section 9(1)(i) also provided that the transactions or activities shall constitute SEP in India, whether or not the agreement for such transactions or activities is entered into in India or the non-resident has a residence or place of business in India or renders services in India.
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