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Let’s Analyze The Effect Of Equalization Levy Of 6% On Digital Ads

Many of you may have got mail from the Google Payments Team regarding Equalisation levy of 6% on the provision of online advertisement services. Now, it has become the most discussed topics among the entrepreneurs, start-up and the individuals. There would be many of you, who have not enough knowledge regarding this tax and how it affects you. We are going to dig out essential information in order to increase the ratio of your knowledge in respect of the effect of equalization levy of 6%. Let’s check it out. 

                                Let’s Understand The Way Of Working Of Google Adsense 

Google Adsense revolves around two elements that our advertisers and publishers. The advertiser is responsible for giving advertisement to Google AdWords and pay for it while publisher stands for publishing an advertisement of Adsense. This is how Google AdWords and Adsense work. 

To Whom It Is Applicable?

The new chapter having title “Equalisation Levy in the Finance Bill 2016” has been proposed by Finance Minister Arun Jaitley on February 29. Now, it has become the most sought-after topic among the entrepreneurs as well as individuals. As per this bill, an equalization levy of six percent of the amount of consideration for specified service will be charged from a resident in India running out business. 

•    It covers the individual living in India and operating business or profession.
•    It is also applicable to a non-resident having a permanent establishment in India. 

Effect Of Equalisation Levy 6%

Now, let’s come to the next point that is how Equalisation Levy 6pc on digital ads is going to affect Indian start-up as well as well established firm. This tax will be applied to the advertisers for their advertisement. Let’s understand in simple words. Suppose there is advertise who was paying $100 for advertisement before applying this tax. Now, the advertiser has to pay for the same advertisement around $106. 

Now the point is that the advertiser has to pay more, but publisher gets less amount for the same advertisement. It is the drawback of this Equalisation levy 6pc tax going to imposed by the government of India. To put in other words $6 is going in the pouch of the government of India. However, this bill is going to pinch the pocket of the advertiser, but not of the publisher means Adsense user. It is only the advertisers, who come under the direct effect of this tax. 

How Does It Impact Indian Startups

These days the value of online marketing cannot be underestimated. It is high on demand and everyone wishes to use this way to get in connect with the new and potential customers. It is considered very important for start-up as well as they do not put weight on the budget. Google and Facebook are considered the two most important ways to advertise as of now. 

After applying this tax, the 6pc would be added to the 14.5 percent service tax. And the fact cannot be denied that it makes the digital advertisement more expensive for the local, small/medium and newly formed Indian Advertisers. Instead of going along with a straight tax on digital advertising platform, the government has figured out another way called an “Equalisation Levy” of 6pc on the amount the advertiser pays for publishing the add. 

In the last, it is required to clear one thing that the tax Equalisation Levy is applied to the online advertising service and the related services. There is no need to mention that Google is number one online advertising service provider and is being used on a large scale among the start-up as well as the well-established firm. 


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