Whilst great hardships caused by the Coronavirus outbreak to business communities, one positive development, which we all must admit is that most businesses have gone digital from the traditional brick and mortar models. We have witnessed this transformation was happening in the recent past. However it has picked up pace now with greater force. Whether for survival or growth, businesses have chosen the digital route wherever possible. Small businesses too are now migrating to sell their products on the digital platforms. Thus value is now created digitally.
The question is, are these transactions under the ambit of tax authorities? Are the tax authorities ready for Future India? What steps have the regulators taken / what are the challenges at every step?
In the recent financial years, the Union Government has made amendments in following areas, to widen the tax base to capture international transactions under Indian tax net.
- Significant Economic Presence
- Equalization Levy
- TDS (WHT) on E-commerce Operators
- Place of Effective Management in India (POEM)
In the recent past, the non-resident digital giants, despite not having any physical presence within India, managed to make huge chunks of revenue from the country, paying no taxes thereon by remaining outside the ambit of the tax framework. However, this will no longer be possible. Thus, companies with no physical presence but earning revenues from the country’s ‘person’ will no longer be able to evade taxes by moving to the tax heavens.
With the above amendments, the Indian Government has firmly has taken effective steps to move from conventional tax models to modern digitalized business processes. This will help making Indian Tax structure future ready and collect due taxes.
