Justifying the 2% equalisation levy (EL) imposed by India on the supply of services by multinational enterprises, finance minister Nirmala Sitharaman on Monday said it is a sovereign right to tax revenues earned from operations in the country.
“Equalisation levy is not a unilateral measure… we are not an exception as many countries have done so,” Sitharaman said in a post-Budget conference in Bengaluru.
Companies like Netflix and Facebook get their consumers in a large country like India. “It’s important for the industry to stand up and tell their international sellers that India deserves to tax this,” she said.
In October 2021, G20 countries approved a global deal to adopt a 15% minimum corporate tax and reallocate taxing rights for large profitable multinational enterprises (MNEs) to countries where they sell products and services.
India will continue with an equalisation levy, also known as ‘Google tax’, which fetched about Rs 2,200 crore in FY21 and is projected to generate revenue of over Rs 3,000 crore in FY22, till the OECD framework is implemented.
According to the latest OECD framework agreement, Pillar One will apply to MNEs with profitability above 10% and global turnover above €20 billion. The profit to be reallocated to markets will be calculated as 25% of the profit before tax in excess of 10% of revenue.
To a question on the goods & service tax (GST), revenue secretary Tarun Bajaj said the GST Council has to decide whether there is a need to reduce GST rate on cement from 28% to 18%. “We need to rationalise tax duties so that both the Centre and states get revenues. GST revenue-neutral rate (RNR) has already fallen. I am appealing to the rich people to kindly pay the taxes,” Bajaj said.
As against the intended GTS RNR rate of 15.5%, it is now hovering around 11%, due to large scale tinkering with rates after the new tax regime was rolled out in July 2017.
On anti-dumping duties, Bajaj said the government has been analysing the matter for some time.
“We are analysing anti-dumping duties not just steel but other products as well. India is the largest implementor of anti-dumping duties. It creates issues for MSMEs. This year, we have been very cautious in our evaluation of anti-dumping duties and have removed them wherever necessary. This year, the steel industry has made huge profits, capacity utilisation has gone up, revenues are up so we don’t see the need,” Bajaj said.
Sitharaman said the Budget for 2022-23 stands for continuity to provide a tax predictable regime and a vision for the next 25 years.