Google’s Play Store is absorbing the 15% digital service tax that the Indian government started requiring foreign businesses to pay from December last year. The company, which runs the Play Store business out of an offshore entity in Ireland, has the infrastructure to support tax-inclusive pricing on its billing platform; this is supported in 37 countries, including Australia, Japan, Italy, Belgium, and the UK. Three months after the digital service tax came into force in India, Google has yet to enable tax-inclusive pricing for India; it is instead manually paying the tax without showing the amount in Play Store purchase receipts.
In a statement to MediaNama, Google clarified that it “has been paying the taxes since 1Dec 2016 [sic] and this will continue till it introduces the changes in this Play store invoices”.
Google isn’t using its tax-inclusive pricing system to take the responsibility of taxing individual purchases on the Play Store. Apps, Books, Films, and Music purchases from the Play Store all show a tax of “₹0.00” in Play Store purchase receipts. Google had earlier said that this tax “will be applicable” on individual Play Store purchases. The Play Store’s merchant guidelines currently state that app developers around the world are responsible for determining whether they are responsible for filing taxes in India, and for actually going through the process of filing them. Google has refuted this guideline in its response to MediaNama.
The 15% digital tax
In November, the Indian government announced that companies outside India offering digital services to individual consumers will have to pay a 15% service tax on all purchases. Hosting provider DigitalOcean, and Internet TV network Netflix were among the first companies reported to be complying with this tax. The tax applies to all online services and products like e-books, films, cloud backup, and so on.
Google’s approach is different from Apple and Steam pay
Two other large online marketplaces, Apple’s App Store and online game distributor Steam, have announced that they will comply with the new tax by integrating it with their billing infrastructure. Apple started paying service tax on their Music service in the very first month of it coming into force.
The App Store increased prices in India to accommodate the new tax this January. Steam, the digital game distribution platform owned by Valve, announced last week that they would be paying the tax from March. While Apple’s change will increase the prices of all apps in India by 33%, the long-term impact of this tax on Steam purchases may depend on whether individual sellers on the platform will “absorb” the tax by reducing the price of their products on the platform.
UPDATE: An earlier version of this article used Google’s Play Store merchant guidelines (and purchase receipts) to conclude that the company was shifting the responsibility of paying Indian service tax to individual developers around the world. After this story was published, Google clarified that it was indeed paying the tax on its own, and was working on setting up tax-inclusive pricing for the Play Store in India. This story has been updated to reflect that statement.