15% service tax to Google tax: All you need to know about Budget proposals that kick in today
June, 02nd 2016
Today is the day when the Narendra Modi government is ringing in the achche din for consumers and online businesses as a slew of proposals in the Union Budget 2015-16 will comes into effect.
That include 0.5 percent agriculture cess on all services and an equalisation levy of 6 percent on cross border digital transactions.
With the imposition of Krishi Kalyan Cess (KKC), the total incidence of service tax will increase to 15 percent, thus making eating out, phone usage, air and rail travel, expensive.
The equalisation levy or 'Google tax' in common parlance will apply only on payments relating to online advertisements.
Last month, Internet and Mobile Association of India (IAMAI) had said that levy on online advertisement revenue of foreign companies would "severely raise the cost of doing business" for Indian tech startups. Also payment in cash for buying goods and services worth more than Rs 2 lakh with the exception of jewellery will attract 1 percent tax collected at source (TCS) from today. The existing TCS of 1 per cent on cash purchase of over Rs 5 lakh of jewellery and over Rs 2 lakh of bullion will continue, tax officials have said.
The Income Tax Department has been levying 1 percent TCS on cash purchase of bullion in excess of Rs 2 lakh and jewellery in excess of Rs 5 lakh since July 1, 2012. That position is maintained and there is no change in the position, the officials said.
Besides, sale of options will also attract increased Securities Transaction Tax (STT) of 0.05 percent from today. Currently, STT is 0.017 percent.
In the Budget speech, Jaitley had said: "I also propose to collect tax at source at the rate of 1 per cent on purchase of luxury cars exceeding value of Rs 10 lakh and purchase of goods and services in cash exceeding Rs 2 lakh."
"For compliant tax payers with resources, this levy not only advances collection of tax when the expenditure is incurred, but it provides data to tax authorities to identify the persons who incur such expenditure, but may be missing from the tax base." The government also opens the 4-month disclosure scheme for domestic black money holders to come clean.
The Income Declaration Scheme provides one-time opportunity to domestic black money holders to come clean by paying tax and penalty of 45 percent on such assets will open tomorrow.
"Starting from day after tomorrow, the new window opens and I will advise all those who have any undisclosed asset to declare it and pay the tax and sleep well. Otherwise, the way the disclosures are becoming more and more public, they will run into serious trouble," Jaitley had told PTI in an interview from Tokyo recently.
However, the scheme is not meant for those who have earned money through corruption.
Last year, the government had launched a similar scheme giving opportunity to people having unaccounted assets abroad to come clean by paying taxes and penalty.
Another major budgetary proposal, the Direct Tax Dispute Resolution Scheme, which seeks to resolve cases pending in various courts, tribunals, arbitrations or are in mediation under the Bilateral Investment Protection Agreement (BIPA), will take effect from today.
The scheme provides an opportunity for settlement of cases emanating from retrospective amendment of tax laws, by asking companies to pay the basic tax demand and get waiver on interest and penalty.
Experts view the scheme as a big step towards tax reform and hope that it would act as a breather for companies like Vodafone and Cairn, which have been facing multi-billion dollar tax liability following retrospective tax amendments made in 2012.