Google tax collection jumps 4 times in Q1; Bengaluru tops the list

This comes in the backdrop of India agreeing to the global tax deal proposal at the OECD, which will require New Delhi to withdraw the equalisation levy by 2023

India’s earnings from the contentious 2 per cent equalisation levy on non-resident digital players like Google, Netflix, and Amazon nearly quadrupled in the first quarter of the current fiscal year.

This comes in the backdrop of India agreeing to the global tax deal proposal at the Organization for Economic Cooperation and Development (OECD), which will require New Delhi to withdraw the equalisation levy by 2023.

Collection from the levy, or the so-called Google tax, grew 260 per cent in the first quarter of 2021-22 at Rs 778 crore against Rs 216 crore during the same time last year, the data accessed by Business Standard showed.

The robust mop-up was led by India’s IT hub Bengaluru, which accounted for about half the collection at Rs 350 crore, a growth rate of 280 per cent over last year. It was followed by Hyderabad, which saw collection grow by 147 per cent to Rs 227 crore from Rs 92 crore last year.

Delhi recorded 1,064 per cent growth over the corresponding period last year to Rs 128 crore from Rs 11 crore.

Mumbai saw collection grow to Rs 48 crore from Rs 14 crore last year in the same quarter.

E-commerce companies that fall under the scope of the equalisation levy include Adobe, Uber, Udemy, Zoom.us, Expedia, Alibaba, Ikea, LinkedIn, Spotify, and eBay.

“Last year, several multinationals could not comply with the stiff timeline as the amendment to the payment form came barely three days prior to the deadline. Besides, there was economic inactivity in a large part of the first quarter last year,” a government official said.

India collected Rs 2,057 crore from the levy in 2020-21, an 85 per cent growth rate over Rs 1,136 crore in the previous fiscal year.  Meanwhile, direct tax collection net of refunds saw an 89 per cent growth rate over last year at Rs 2.64 trillion as against Rs 1.4 trillion last year.

Gross direct tax collection is 65 per cent higher at Rs 3.4 trillion against Rs 2.06 trillion. Contrary to the rising revenue potential of the equalisation levy, the OECD tax deal, being finalized, will have a limited revenue significance for India as residual profits of only the top 100 global players will be allocated to market countries. 

The equalisation levy has a much lower annual revenue threshold of Rs 2 crore (euro 0.2 million) as against euro 20 billion agreed upon by 130 countries at the OECD deal. India, along with other developing countries, was pitching for at least a euro 1 billion threshold to cover at least 5,000 global entities.