The Finance Minister had in his budget introduced the equalisation levy earlier this year. Popularly known as Google tax, this equalisation levy (@ 6%) will come into force from today, June 1 2016 onwards. Under the current structure it will only apply to payments for online advertisements made by Indian business entities to non-residents (such as Google, Yahoo, Twitter, Facebook etc.) where the aggregate annual payment to the non-resident exceeds Rs 1 lakh. Only B2B transactions attract this levy. While only online advertisements are taxable now, the finance ministry is planning to include more services through notification in the coming months.
However, where the non-resident service provider has a permanent established place of business in India and the bill is raised by such Indian office, the equalization levy will not have to be deducted by the Indian payer.
It may be noted that amid stiff opposition from foreign service providers this tax was introduced and with this India becomes the first country in the world to tax digital services by applying the equalization levy.
Source – Ministry of Finance and Social Media