Roadmap for Answer Writing Introduction to Green Accounting: Define green accounting and its objective of integrating environmental costs into financial assessments. Mention the significance of green accounting in fostering sustainable development. Importance of Green Accounting in India: Highlight the role of green accounting in policy-making ...
Model Answer Understanding Digital Tax and Its Rationale in India What is Digital Tax? Digital tax refers to taxes imposed on digital goods, services, or business activities conducted over the internet. In India, this tax is primarily aimed at non-resident digital companies that generate significantRead more
Model Answer
Understanding Digital Tax and Its Rationale in India
What is Digital Tax?
Digital tax refers to taxes imposed on digital goods, services, or business activities conducted over the internet. In India, this tax is primarily aimed at non-resident digital companies that generate significant revenue from the Indian market, such as Google, Facebook, Amazon, and others. India introduced the Equalization Levy (EL) in 2016, a 6% tax on non-resident digital companies. This was expanded in 2020 to include a 2% Digital Service Tax (DST) on foreign e-commerce businesses with a turnover of over Rs. 2 crore annually (Source: Finance Act 2020).
Rationale for Introducing Digital Tax in India
- Addressing Obsolete Tax Laws
Traditional tax laws were designed around brick-and-mortar businesses. The rise of digital services created a gap in tax regulations, leading India to introduce DST to better capture revenues from the digital economy (Source: Finance Act 2020). - International Commitment
The introduction of digital tax aligns with global efforts, like the OECD’s BEPS (Base Erosion and Profit Shifting) program, which seeks to reform international tax laws to ensure that digital companies pay taxes where they earn revenue (Source: OECD). - Fair Competition and Global Competitiveness
The digital tax ensures that foreign digital companies contribute to the Indian economy, creating a level playing field for both domestic and international businesses operating in India (Source: Government of India).
Challenges in Implementing Digital Tax
- Retaliatory Tariffs
The United States has criticized India’s DST, claiming it discriminates against U.S.-based digital companies by excluding domestic companies. This has led to investigations and the threat of retaliatory tariffs, potentially escalating into a tax war (Source: U.S. Trade Representative). - Burden on Consumers
Critics argue that the digital tax may be passed onto consumers in the form of higher prices for goods and services, defeating the purpose of targeting foreign companies (Source: Industry Experts). - Lack of Consensus
International disputes over tax compliance and the absence of a unified dispute resolution mechanism complicate the effective enforcement of digital taxes (Source: OECD). - Tax Sovereignty Concerns
Developing nations like India have expressed concerns over global agreements that restrict their ability to enact future digital taxes, potentially undermining their sovereignty in tax matters (Source: Government of India).
To address these issues, coordinated global efforts and clear dispute resolution frameworks are essential for the successful implementation of digital tax.
See less
Model Answer Importance of Green Accounting in India Better Policy-making and Sustainable Growth Fact: Green accounting enables informed policy decisions balancing economic growth with environmental conservation. Source: Ministry of Environment, Forest and Climate Change, India. Biodiversity ConservRead more
Model Answer
Importance of Green Accounting in India
Better Policy-making and Sustainable Growth
Biodiversity Conservation
Promotes Innovation
Improved Quality of Life
Enhanced Corporate Social Responsibility
Access to Capital
Obstacles in Green Accounting Implementation in India
Developmental Imperatives
Lack of Reliable Data
Absence of Multisectoral Accounting
Additional Costs
Lack of Accountability
Efforts at various levels are crucial to establish effective policies and incentives for a universal green accounting system in India to ensure sustainable development and preserve natural resources for future generations.
See less