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What is Google tax and its impacts

Google Tax or Facebook Tax will be levied from 1st June 2016, as was earlier announced by Finance Minister Arun Jaitley.

What is this Google Tax?

As the name suggests it’s a tax to be imposed on technology companies like Google, FaceBook , LinkedIn etc who are offering their services to Indian Market.

The Central government has reported that, beginning from Wednesday, it will force a 'Leveling Levy' of 6% on cross-border exchanges/transactions of more than Rs 1 lakh. Named as the 'Google charge', this is basically a backhanded expense on remote organizations like Google, Facebook and Twitter for online administrations they give to Indian organizations that cost above Rs 1 lakh a year.

Why has this been introduced?

This duty has been aimed at technology companies that profit by means of online Ads. Their income is generally steered to a duty shelter nation. This expense will bring the organizations under the tax radar in India. With this new expense, India has additionally joined the rundown of other Organization for Economic Cooperation and Development (OECD) and European nations where a comparable duty is as of now set up.

Who will face the Heat?

In case you're an entrepreneur, a business owner running a small or medium size business, everyone needs an online presence or we may say everyone is looking at potential business from online platforms like Google or Facebook. Businesses do spend money in marketing and as digital marketing is a buzz now-a-days, biz owners spend a part of their marketing budget on Google Adwords or Facebook Ads. So these are the people who will be facing the heat.

Let us try to make this situation easier for you –

If a business owner spends Rs 2 lakhs for online ads like Google PPC or Facebook Adverts in order to generate some business in a financial year.

With the new Google Tax set up, he/she will need to withhold 6% of the sum – i.e. Rs 12,000 – and pay the equalization Rs 1.88 lakh to the foreign company for its paid ads. The withheld sum will be paid to the Government.

Though it’s yet not clear whether the foreign companies will remain to endure the loss by essentially tolerating lower margins due to the new duty or will they hike the promoting rate considering the new assessment?

Though latter seems to be happening!!!

Also for Digital marketing companies like us, it will have a direct impact. So it’s better to ask the clients to pay directly now!!!