Around three months after India announced a 2% tax on digital services for foreign billings, a lobby group representing American technology giants announced that its members have sought deferment of first payment of the nation’s digital tax due this week.
According to sources familiar with the knowledge of the matter, group members are urging Finance Ministry to delay the payment date of the tax’s first installment which falls on 7 July or authorizes interim relief from interest on delayed payment.
The lobby group, USISPF (U.S.-India Strategic Partnership Forum) argued that the digital tax was ‘riddled with numerous interpretational and ambiguities concerns’ and it was unclear on what amount companies needed to pay the tax. In a letter to the Finance Ministry, the group said that companies are facing difficulties in meeting the timeline for the tax payment.
Foreign billings are where organizations take payment outside of India for a service provided to consumers in India. The tax aimed at taxing foreign firms that have a considerable client base in the nation but were billing them through their offshore units, conveniently escaping the nation’s tax system.
The digital tax applies to e-commerce transactions on a website like Amazon.com. Technology giant Google has been worried about this tax as it applies to advertise revenue garnered overseas if those ads target Indian customers.
Nivedita Mehra, Managing Director for India at USISPF said that the agency had sent the letter to the Indian finance ministry as it wanted to resolve the concerns of their member companies.
In its letter, USISPF also stated that the Indian government’s new requirement of gaining an income tax identification number for the payment of tax will pose ‘administrative challenges’ to a few foreign companies.
Meanwhile, the finance ministry of India did not respond to an immediate request for comment.