New Taxes Imposed by Indian Government

Krishi Kalyan Cess

This June, the cost of services is going up. Govt. of India on 30th of May 2016, announced a new tax on all the taxable services. The new tax is Krishi Kalyan Cess of 0.5 percent which will be applicable from 1st June. This will make the total Service tax to be 15 percent.

The Krishi Kalyan Cess was announced by finance minister Arun Jaitley to develop rural infrastructure in India. This tax will be levied in addition to existing Swachh Bharat Cess of 0.5 percent and service tax of 14 percent. The services which become more expensive are:

Air and rail travel
Mobile bills
Restaurant services
Hotel bills
Radio taxi
Construction services
Annual maintenance contracts
Services in relation to financial leasing, including hire purchase
Banking services like issuance of statements, ATM charges, new cheque books
Private Coaching or tuitions

Tax on Luxury Cars

Buying a car will bore a deeper hole in your pocket. The cars with a price tag of above Rs.10 lakh will cost more from this June 1. The tax is luxury tax and it will be imposed on luxury vehicles as announced by finance minister Arun Jaitley.

The tax will be imposed at the rate of 1 percent. The luxury car tax will affect all carmakers that have SUVs and luxury cars on offer in India. The government hopes to collect Rs 5000 crore from the luxury tax.

Google Tax and Facebook Tax

The Google and Facebook tax was announced by Arun Jaitley, finance minister. The earlier anticipation was that this tax will be related to e-commerce companies. This tax is introduced to impose a tax on the income gathered by a foreign e-commerce company outside of India. Google Tax in India will impact the bottom lines of companies like Google, Facebook, and other giant companies.

The tax will be imposed on any person or entity that makes a payment exceeding Rs 1 lakh in a financial year to a non-resident technology company. These companies will now need to withhold 6% tax on the gross amount. The tax will only be applicable on payments to the companies that don't have a permanent establishment in India. And the tax is only applicable when the payment is made to avail certain B2B services.

This tax will impact small business or an online start up if they use Facebook or Google for advertising and marketing promotions.

Example: If a company Z has to pay Rs 1 lakh to a foreign company. Then the company Z will have to withhold 6% of 1 lakh that is Rs 6000 and the rest Rs 94000 will be paid. The withheld amount which is Rs 6000, in this case, will be paid to the government.