The digital service tax will be doubled to 3% in July this year, as the government taps the growing online economy to increase its domestic revenues and narrow its fiscal deficit.
The new rates are expected to be passed by the lawmakers. The increase comes over a year after the DST came into effect, affecting tech companies such as Amazon.
The expression "one-point-five percent" was deleted from the Third Schedule to the Income Tax Act.
The gross transaction values of tech companies are taxed by the DST. If a company or individual provides a service to a user who is located in the country, they are obliged to pay.
Over-the-top services like video-streaming and podcasts, subscription-based media including news, digital marketplaces, and downloadable digital content like e-books and films are included in the country's revenue authority.
Other services include electronic data management services, electronic ticket booking, online distance learning and the sale, and licensing or monetization of any data collected about users generated from places like digital marketplaces. Overseas companies with no offices in the country are required to register electronically or appoint a tax representative in the country to file the returns and make payments.
The Covid pandemic and the efforts by the Paris-based Organization of Economic Co-operation and Development to ensure that countries increased taxing rights over the revenues of multinationals with operations in their countries accelerated the adoption of DSTs.
In a tax deal brokered last year, out of the 140 members, only 4 abstained from an agreement that set a 15% minimum corporate tax rate for multinational enterprises.
Multinationals will pay a fair share of taxes in countries where they have operations, according to the Organization for Economic Co-operation and Development.
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