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Facebook and Google Seek to Delay Paying India's Digital Tax

By Aditya Raghunath – Apr 1, 2020 at 11:14AM

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At least a six-month deferment sought.

Tech heavyweights including Facebook (META -1.69%) and Alphabet's(GOOG -1.39%) (GOOGL -1.40%) Google are looking to defer paying India's 2% digital tax, according to a Reuters report from Tuesday.

Last week, India announced that digital service providers will be subject to a 2% tax. This tax, also known as equalisation levy, will be charged on the services provided in India where the payments are taken abroad.

E-commerce companies such as Amazon and eBay will also be affected by the tax. In fact, any overseas platform that streams, advertises, or sells goods to an Indian IP address will be taxable, according to the new law that is set to be implemented starting April 1.

A computer keyboard with one key showing the Indian flag and another with the word e-commerce on it

Image source: GETTY IMAGES.

Given the ongoing circumstances surrounding the COVID-19 pandemic, Google and Facebook have asked the tax to be deferred by at least six months, Reuters reported. India, on the other hand, is looking to boost its tax reserves, which will also provide the country with additional resources to fight the coronavirus.

India's internet users are increasing at a fast pace  and so is the country's e-commerce and digital ad markets, making it extremely attractive for Amazon and other players. However, the amount of revenue that can be generated by the new tax remains unclear. 

The technology giants seem to have been taken by surprise by the tax. India's finance minister did not make any mention of the levy during her budget speech in February. The levy was reportedly included in the Finance Bill on March 23.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook. The Motley Fool recommends eBay and recommends the following options: long January 2021 $18 calls on eBay, short January 2021 $37 calls on eBay, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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