India Targets Global Digital Firms for GST Compliance

As per CNBC-TV18 reports, tax authorities are increasing efforts to ensure that global digital service providers pay their fair share of taxes. It suggests that several foreign companies offering services to Indian users continue to avoid registering under India’s Goods and Services Tax (GST) laws, even after changes in rules last year.

Tightening the Net Around Foreign Firms

In October 2023, India widened the scope of Online Information Database Access and Retrieval (OIDAR) services, making it harder for global digital companies to avoid GST. However, many are still unregistered and do not pay taxes on the revenue they earn from Indian customers.

As per CNBC-TV18, the Directorate General of GST Intelligence (DGGI) has now launched a new wave of enforcement actions. The goal is to bring more foreign digital firms into the Indian tax system. These include platforms related to cryptocurrency, online education, cloud software, content creation, AI tools, design services, cloud storage, and digital advertising.

How the Government Is Acting to Enhance GST Compliance

As per CNBC-TV18, the DGGI has started contacting large Indian companies and service users, urging them to share details about their dealings with foreign platforms. The hope is that this pressure will force global firms to register under Indian GST laws.

Indian payment gateways like Razorpay, Cashfree, and Pine Labs are also under pressure to block payments to non-compliant foreign companies. Tax officials are gathering transaction data from banks and the Reserve Bank of India to identify violators. The DGGI is also exploring international information-sharing agreements and has requested new legal powers to block websites of companies that fail to comply.

Sharp Rise in GST Collections

The stricter rules are already working. GST collections from OIDAR services jumped from ₹80 crore in 2017–18 to ₹2,675 crore in 2023–24. This is mainly due to the removal of older clauses that allowed some companies to avoid tax if their services required “minimal human intervention”.

So far, 574 foreign firms, including Canva, Udemy, Blackboard, and OVH, have registered for GST in India.

Conclusion

India’s crackdown mirrors similar moves in Europe and other countries to tax digital services fairly. As per CNBC-TV18, while this could lead to global trade tensions, especially with the US, India believes strong enforcement is key to digital tax reform.

Read more on: Government Confirms No GST on UPI Payments Over ₹2,000

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.