Budget 2021-22 proposal on digital tax likely to land up in court

Foreign players in a fix as they will now come under levy's ambit

The central government’s clarification on the 2 per cent equalisation levy on foreign digital operators in the Budget, which considerably expands the scope of the levy, might be challenged in court, with several companies contemplating filing a writ petition in the coming few weeks.

The writs might be filed on the grounds of the levy’s alleged extra-territorial overreach, as it aims to cover those entities that do not have a physical presence in India, going against international taxation rules. Besides, it might also be challenged under the bilateral tax treaties as it is being seen as “a disguised form of Income