SME and startups have to pay equalisation levy of 6 per cent as the additional cost levied on behalf of companies like Facebook, Twitter, Linkedin for using their platforms for ads and promotions.
Any global corporation having sales and marketing operations in India must be required to invoice their customers in India from a registered entity in India as many foreign companies operating in India despite having sizeable sales and marketing activities and revenues in India, continue to invoice Indian startups and SMEs from their overseas office, community engagement platform LocalCircles Chairman Sachin Taparia wrote in a letter to Revenue Secretary Ajay Bhushan Pandey on Monday.
“Based on consultations conducted with startups and SMEs on LocalCircles, it is proposed that if a global corporation has 1 million citizens/users of India registered with them or has 100 paying customers (businesses or citizens) or annual revenues of over Rs 10 crores from customers in India, they must be required to invoice all Indian customers from their India entity,” said Taparia.
SME and startups have to pay equalisation levy of 6 per cent as the additional cost levied on behalf of companies like Facebook, Twitter, Linkedin for using their platforms for ads and promotions. “This is not just an added cost but also there is a compliance burden on startups and SMEs. Moreover, for foreign companies with a direct presence in India, the invoicing should happen from their India office,” Taparia told Financial Express Online adding that this is a major revenue opportunity for India.
Since this is a levy, they (SMEs and startups) are unable to claim Input Tax Credit for this cost incurred. While they incur additional costs of the levy and its compliance, the government also loses out on GST collection and Income Tax collection in the majority of the cases, Taparia wrote. As per a survey conducted by LocalCircles among 2,582 startups and SMEs this year, on the issue of the equalisation levy, 82 per cent said that government must make billing from Indian offices of these foreign companies mandatory for customers in India.