Foreign payment firms such as Mastercard, Visa and American Express, who are currently out of tax net in India, may have to pay around 15 per cent tax on their income in the country.
All the abovementioned firms function in India through the non-permanent establishment and have been working to set up servers locally as ordered by the Reserve Bank of India (RBI).
A few months ago, RBI had asked these payment firms to locally store data on all transactions taking place in India from October 15, 2018.
Once they move servers in India, they will be levied domestic taxes.
These payment companies may be taxed at about 15%, said ET report adding that the rate levied on firms that have invested in India through their arms in countries like Singapore with which India has tax treaties.
According to some experts, this would lead rise in cost for foreign payment firms and deter new players like Google, Whatsapp, and Apple. They may look out for some alternative like using servers on rent or of some other Indian company.
Except Mastercard, Visa and American Express said they had submitted plans to comply with the regulations to the central bank. Both firms spokespersons have said that they Compliance with local laws and regulations is a top priority for us in all the countries we operate in.
In the last few months, the central bank has specifically asked companies like Amazon, Whatsapp and Google Pay to follow the data localisation rules. Indian counterparts such as Paytm, PhonePe and MobiKwik and many others, have appreciated the government’s plan for data localisation.
In July this year, a panel chaired by Justice BN Srikrishna has submitted data protection report to the government suggesting domestic data to be stored on servers located in India.