In a letter to the Central Board of Direct Taxes (CBDT), Local Circles, a social media platform for communities, asked for a level playing field for Indian startups with international tech giants operating in India like Google, Twitter, LinkedIn, others, as reported by Inc42.
Written on behalf of Indian startups, the letter brought into focus on how foreign companies operating in India with significant revenues, users and paying customers in India, have been invoicing its consumers and businesses from their parent companies which are based overseas. Which leads to a majority of the revenues and income generated in India being reported in the parent company, while just a small portion gets reported in its India-based subsidiary.
While this helps these companies to reduce their tax burden, it also leads to Indian startups paying up higher tax rates compared to their foreign counterparts.
In order to deal with the alleged inequality, the letter proposed, “If a global corporation has 1 million citizens/users of India registered with them or has 100 paying customers (businesses or citizens) or annual revenues of over ₹10 crores from customers in India, they must be required to invoice all Indian customers from their India entity.”
LocalCircles along with other Indian startups and SMEs believe that this change would not only provide a level playing field but also boost direct tax collection for the Indian government.