How Service Tax norms killing Indian Domain Hosting Companies
I, as the ombudsman in the industry of Domain Name Registration & Web Hosting since last 12 years have experienced the effect ( Upward & downward movements) of tax policies set by Indian government on the services of Domain Name Registration & Web Hosting. This industry is the live example of how Indian government laws kills the Indian companies businesses.
Indian government to have equal tax policies for both, foreign competitor and Indian entities so that Indian entities can compete on the international platform.
Present scenario of Service industry of Domain Name Registration and Web Hosting in India:
- Foreign Companies who are providing these service in India, are not liable to charge any service tax.
- The basic value of the services provided by Indian companies and international companies (for e.g. Go daddy, ENOM, Reseller club, Name.com etc) are more or less same only. But all Indian domain & Web Hosting services providers are need to charge additional service tax @ 12.36% also from the service receiver.
- Therefore because of additional service tax burden castes on end-user by Indian entities value of service ultimately gets inflated in compare to prices quoted by international service tax providers.
- In nut shell cost to the end-user will be higher if they are getting these services from Indian entities or Indian service providers. E.g .COM domain from Go daddy (an international company) or any Indian company cost 8.5 – 9.0 USD, but Indian company charge service tax on that making its final cost to customer 9.55 – 10.25 USD, which is a huge gap for end customer. End customer can pay directly via a Credit card to foreign companies, so they better prefer to save this amount
- This affects the thinking of end-user and they prefer international companies instead of services from Indian companies. Therefore Indian companies are loosing market share in the industry drastically.
- Many Foreign Companies have bank accounts in Indian banks ( ICICI Bank ) from which they transact with their Indian customer without charging any service tax. As Indian customers directly can deposit the amount in rupees in their bank account they are not worried about any foreign currency conversion etc.
- Indian entities are loosing their market capitalization in this industry. Indian business is going out to foreign companies just because of Indian government’s irrational tax policies.
- We are not loosing only the market share but also precious foreign currency revenue too. This is the loss of whom..????
- Indian service provider not only affecting but ultimately Government of India is being getting affected. Govt. of India itself inviting the foreign companies to capture whole market of this industry and ruining the platform for Indian businesses.
Expectations from Indian Government:
- There should be equal opportunities within the same business environment. If Domain Name Registration Services are provided by the foreign companies, Indian government doesn’t levy service tax. But this is not the situation if the same services are provided by Indian entities.
- If Govt. of India can allow foreign companies to open up their bank accounts with Indian bank, why they can’t demand for service tax from foreign companies?
- Indian Government authorities are to be expected to make rational tax policies where Indian companies also can play with foreign competitors at same level unlike now.
- It is expected from Govt of India to protect the interest of Indian entities and therefore resulting in benefit of themselves(in form of tax payments made by Indian entities etc).
A note for Companies and Individual who buying from these foreign companies, as a buyer you need to pay service tax. Most of such buyers are not aware of this law. I had a separate article on this >>