RAS question
Equalisation Levy (Google Tax) in India was levied on:
Correct answer: (D) Digital advertising and e-commerce services by non-resident companies.
India's Equalisation Levy, often called the Google Tax, was levied on specified digital advertising services and later on e-commerce supply or services by non-resident companies.
Explanation
Equalisation Levy targeted the tax gap created when digital businesses earned revenue from the Indian market without the ordinary physical presence that conventional tax rules often relied on. The Finance Act, 2016 introduced it for specified online advertisement-related services received from non-residents. PIB's 2016 Finance Ministry release describes the proposed 6% levy on consideration received by a non-resident for specified digital services, including online advertising, services for online advertising and digital advertising space. The levy was later extended to e-commerce supply or services from 1 April 2020 to before 1 August 2024. PIB's 2021 release supports that extension by describing India's 2% Equalisation Levy on e-commerce supply of services by non-resident e-commerce operators. Its provisions are not applicable from 1 April 2025.
Why the other options are wrong
- (A) All imports is too broad because the levy was tied to specified digital services, not to the general import of goods or services.
- (B) Social media platforms is too narrow because the levy covered specified online advertising and, later, e-commerce supply or services, not only social-media businesses.
- (C) Domestic e-commerce is wrong because the levy applied to non-resident entities, while India-based e-commerce operators were already taxable in India for Indian-market revenue.
Concept
This tests the digital taxation part of public finance and the Indian economy syllabus. It recurs in RAS because Equalisation Levy links tax policy, e-commerce and India's response to cross-border digital business models.