e-Service Tax On Overseas e-commerce Companies

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Government has made a major change in the indirect tax which is now being implemented. From now on the customers who buy products from various foreign websites, including online games, e-books, software and various other intangible products will now have to pay higher tax. The government has levied 15% tax on all such purchases which means that the new price will be inclusive of 15% tax levied by the government.

Nature Of the Tax:service-tax

Regrading this, Central Board of Excise and Customs issued notification stating that e-service Tax will now be levied on the consumers. This translates into the fact that the consumer who is buying product from the online portal will now pay tax to the overseas service and content providers. The statement issued by the department suggested that the tax will be levied on the companies that offer online information and database access or retrieval to local authority, government, governmental authority or an individual in respect of anything but commerce, industry or any other business or profession. Further, the notification said that that e-commerce companies in India are already paying this tax.

Till now the e-service tax was such that the tax was levied if the user bought any service from the e-commerce website in India. However, this tax was not applicable if the services are being purchased from the foreign e-commerce website.

So basically, the overseas companies that are offering the OIDAR services in India will have to pay the 15% as tax. Under this tax system, the location of the receiver is considered as the location of delivery compared to the earlier case where the location of the delivery of the service. One thing is clear that all the company that fall under this category will have to pay the tax but whether this burden will be passed on to the customer or not is still not clear. If the companies do not pass this to the consumers, then the companies will themselves bear this cost which mean that the profitability will come down. It is to be seen if the companies will transfer this cost to the consumers in ultra competitive market. On the other side, government will see increase in revenue by imposing tax on the e-commerce companies. Only B2C OIDAR services will be taxable with effect from December 1 2016. This OIDAR service is where the provision of the digital content is entirely digital such as when consumer clicks the buy button the website.

Mode Of Payment

For government, it is a challenging task to administer whether all the companies are paying tax but as the multinational companies do not want any type of hurdles and therefore pay all the dues and comply with all the tax regulations. The companies that come under the new tax regime will have three ways to pay the tax:-

Firstly, they can appoint an agent to comply with all the regulations and pay tax in time

Second, they can set up a different unit in India which will help them in paying the tax

Third, look for an agent who can do it on their behalf.



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An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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