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India’s digital tax: the good, the bad, and the ugly

Did you know that the Indian Government is charging digital businesses a fee for collecting tax on their behalf.

Nov 28, 2016

India GST plan

Let’s start with the last first.

The ugly: Did you know that the Indian Government is charging digital businesses a fee for collecting tax on their behalf. This fee is over 1% and comes off the digital business’ bottom line. It is not borne by the Indian consumer who pays the service tax.

This fee is charged by way of a margined FX rate. This rate must be used by a foreign business when converting the tax that the business has collected in foreign currency from Indian consumers. This is then converted back to Rupee for settlement to the Indian tax authorities. You can only sell in Rupee if you are an Indian business, so this situation only applies to foreign businesses. Ugly!

The bad: If a foreign business wishes to implement a system to calculate and collect this tax, the business needs to convert the tax amount back to Rupee using a daily Rupee rate. OK - so that doesn’t seem so bad…

The only official source for this official rate, however, is a PDF that the Indian Central Bank publishes periodically (irregularly) on their website. For the average business this means implementing some kind of manual task of hand-keying in rates to a spreadsheet, or putting in place a system that downloads and scrapes PDFs for the rates. Both options expose the business to very significant human error. Bad!

The good: Taxamo’s solution is ready to support India’s service tax amendment that targets foreign suppliers of digital services to India-based consumers.

We have analysed the business requirements, scoured the taxation legislation, and have designed and implemented the solution. Go on to our dashboard and you will see that it is supported there - as you would expect from the global leader in digital tax.

What is more, as a Taxamo customer, you can hand all your Indian service tax liabilities over to us so they are no longer your problem. We want your sales in India to become our tax liability - not yours. You will not need to worry about tax registration in India, worry about how to get the right amount of Rupee to the Indian tax authority by the 6th of January (due date of first monthly payment), worry about FX rate sources, worry about Indian business validation - find out more here.

Tell your accounting team to chill out over Christmas. Taxamo has you covered.

Phew. From: Your friends at Taxamo :)

Taxamo content is created for guidance only, please consult your local tax advisor.