The \u201cequalisation levy\u201d on online advertising fees paid by Indian customers to foreign companies like Google and Facebook is netting the government a tidy sum of money. The Centre\u2019s EQL revenue in 2017-18 was over Rs 700 crore, much higher than the Rs 315 crore it garnered from the tax in the previous 10-month period. The tax, meant to nullify the advantage of foreign e-commerce firms absent a physical presence in India over local competitors, came into effect in June 2016. Since the tax was mooted in Budget 2016-17, a government committee had proposed that its ambit be widened by extending it to a whole gamut of cross-border digital transactions \u2014 from website hosting and cloud services to facilitation of the sale of goods and services \u2014 between firms abroad and customers here. But the government hasn\u2019t acted so far on this proposal. The levy is often referred to as \u201cGoogle tax\u201d and is applied at the rate of 6% on the payments for digital advertisement services received by non-resident companies without a permanent establishment (PE) here if these exceeded Rs 1 lakh in a year. The companies using these services are required to withhold the tax amount. \u201cWhile the amount collected may not be very big, the tax is an interim measure to tap overseas companies providing digital services in the country. There is a continuous effort worldwide to define \u2018significant economic presence\u2019 and make the relevant changes in double taxation agreements so that a country can tax foreign companies for the portion of revenue earned in its jurisdiction,\u201d a senior tax official said. While PE for any company is conventionally based on physical presence to decide the taxability, the definition has proved to be inadequate in the digital era where a non-resident company can generate substantial revenue without being physically present in a particular jurisdiction, the official added. To overcome the inadequate definition of PE for digital services companies, Finance Bill, 2018, defined \u201csignificant economic presence\u201d which would determine \u201cbusiness connection\u201d of a company in India and whether it is liable to tax as a corporate entity and be covered under the rules of corporate taxation. However, these new concepts and definition will have to be agreed upon and codified in the relevant bilateral tax treaties before digital companies could become taxable as corporate entities, the official said. \u201cMeanwhile, we will continue to have equalisation levy,\u201d the source added.