Taxation Of The Digital Economy In India - Challenges Of E-Commerce And OTT Platforms
- IJLLR Journal
- Jul 5
- 2 min read
Samyuktha Mahesh & Sakshi Dubey, School of Law, Alliance University, Bangalore
ABSTRACT
India’s tax system was not designed for a world where companies can earn crores from Indian user without having any physical presence in the country. For example, e-commerce platforms such as Amazon and Flipkart, as well as OTT (Over the Top) streaming services like Netflix and Amazon Prime Video, generate substantial revenues from Indian consumers, but many do not pay the full amount of tax that would typically be incurred in accordance with Indian tax law. This is largely due to India's tax laws and international tax treaties being created around the concept of establishing a permanent establishment. In other words, they do not consider a company operating in India to be "taxed" unless there is a physical business location or presence of the organization in the country. This paper examines the efforts of the Government of India to provide solutions to this dilemma by way of implementing new tax legislation as well as identifying what else will be needed to ultimately resolve this issue.
India has taken several steps to address these gaps, including the Equalisation Levy introduced in 2016 and expanded in 2020 and abolished by April 2025, and the SEP doctrine, Section 19-OTDS and the OIDR-GST framework. However, each of these measures has its own limits and problem. The Equalisation Levy created double taxation and was ultimately repealed; the SEP doctrine cannot be applied due to the existence of India’s tax treaties; and the OIDAR-GST framework is suitable only for indirect taxes and does not address the direct taxation void created by new digital business models. This paper ends with five recommendations, including renegotiating India’s tax treaties, introducing a new creditable digital service tax, and preparing for OECD pillar one.
Keywords: Digital Economy, E-Commerce, OTT Platforms, Equalizations Levy, SEP, OIDAR, Permanent Establishment, GST, BEPS, Income Tax Act 1961.
