Highlights From India’s Union Budget FY 2023-2024

The Finance Minister of India presented the Union Budget on February 1, 2023. The main focus of the budget (also referred to as the “Amrit Kaal Budget”) is on widening economic growth, boosting key areas like the start-up ecosystem, infrastructure, manufacturing (Make in India) and creating jobs.

The Budget made several fundamental tax changes impacting digital companies. Read the highlights below:

Who should be prepared?

• Digital Platforms and Marketplaces (especially foreign E-commerce Operators)
• Online gaming companies

‍Impact on E-commerce Operators and digital supplies

• The Online Information and Database Access Retrieval Services (OIDAR) helps determine the taxation of digital supplies from foreign e-commerce operators. The scope of OIDAR has now been significantly widened by the omission of the criteria of automation/minimal human intervention. Previously, for a service to qualify as OIDAR, delivery had to be mediated through the internet or an electronic network, and supply had to be automated with minimal human intervention. OIDAR is sometimes known outside of India as a tax on Digital Services or Electronically Supplied Services (ESS).
• All Business to Consumer digital services by foreign service providers are now liable to tax, irrespective of the purpose for use.
• Taxpayers who have opted for composition schemes are permitted to make intra-state supply of goods through E-commerce Operators.
• GST returns (for all categories of taxpayers) cannot be filed after 3 years from the due date of such returns.

Introduction of Withholding tax on online gaming companies under section 194BA

• Online Gaming Companies to now withhold tax at30% on “net winnings”
• No threshold has been prescribed
• Event of Withholding - End of the financial year or at the time of withdrawal by the user, whichever is earlier
• Manner of computation of “net winnings” to be prescribed
• Applicable from July 1, 2023

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