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India Must Rethink E-Commerce Taxation Plans Say Experts

by Robert Lee, Tax-News.com, Hong Kong

06 December 2001


A group of leading tax experts and practitioners in India has criticised the government's controversial stance on e-commerce taxation, warning that it is out of step with the policies of other countries, could lead to double taxation, and could therefore impede the growth of e-commerce in India.

In September of this year, the findings of India's High Powered Committee (HPC)- which was set the task of examining the country's approach to e-commerce taxation, and comprised representatives for the Central Board of Direct Taxes, software companies, and accountancy firms - were published, but the conclusions at which the HPC had arrived came as a nasty surprise to the Indian business community.

In direct contradiction to prevailing international trends, the Committe recommended that India tax online sales on a withholding tax basis, and also suggested that rather than try to untangle the concepts of royalties and business profits, both should be considered taxable, even if a foreign online business has no permanent local presence.

For the experts of the eCom Taxpert group, established recently by Indian company Nishith Desai, the attitude of the government body beggars belief, especially in the current international economic climate: 'The HPC disagreed with 13 of the OECD's 28 recommendations on e-commerce and in some cases didn't even explain why it had adopted such a stance,' explained Shefali Goradia, head of International Taxation at Nishith Desai. 'We were very surprised by the findings, especially given there were practitioners and industry representatives on the committee.'

It is expected that the eCom Taxpert group will submit a response to the HPC's proposals some time in January 2002.


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