Compensation levy burdens automobile manufacturers

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The tax was originally introduced in 2016 with a view to taxing transactions in the digital economy



Auto industry organization SIAM said Tuesday the size of the 2 percent “countervailing levy” needed to be clarified in the wake of changes proposed under the 2021 Finance Act that could affect foreign automakers in India.

The tax was originally introduced in 2016 with a view to taxing transactions in a digital economy.

In 2020, the scope was extended to non-resident e-commerce operators.

It should be levied on payments to foreign beneficiaries for digital services provided, the Company of Indian Automobile Manufacturers (SIAM) said in a statement.

According to industry players, the 2021 Finance Act had proposed some changes to the equalization tax provisions that could expand the scope of the tax scope.

This makes it potentially applicable

not only e-commerce retailers / marketplace operators, but also traditional brick-and-mortar stores with a fair degree of digitization.

SIAM General Director Rajesh Menon

said: “Digitization is used in the automotive industry

for administrative reasons and to increase efficiency – not to make a final commercial decision about selling and buying. “

He went on to say that actual commercial decisions are made offline and under the master agreement in the form of a license agreement or a joint venture agreement.

“Therefore, the internal digital system for supply chain management should not fall under the provisions of the equalization charge.”

The new system is expected to come into force on September 1 of this year.


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