Google pauses Play Store payouts to developers in India

Google on Wednesday began to pause payments to Indian developers selling digital goods through Play Store payments, the company confirmed, as it prepares to comply with India’s new digital tax that comes into effect next month.<br><br>The Indian government has imposed a new tax requiring overseas companies providing digital services to collect taxes from Indian consumers.<br><br>The tax, set to go into effect on July 1, applies to a broad category of items including downloaded movies, software, e-books as well as digital advertising and other supplied services. The government has also made such companies liable for collecting and paying the taxes.<br><br>Google says developers will continue to receive earnings from the Play Store, but the payouts will be less the applicable taxes.<br><br>In order to comply with the new law, Google has said it will cut developer earnings by 2% for all paid apps and in-app purchases.<br><br>The 2% tax will apply on the net transaction value paid to Google Play. This includes both in-app purchases and paid apps on the Play Store.<br><br>“This is in addition to the existing 15% or 30% GST (Goods and Services Tax) that is already being levied on Google Play’s commission (for paid apps and in-app purchases),” explains the email sent by Google to Indian developers.<br><br>The US tech giant says it will apply the 2% tax on paid apps and in-app purchases sold between July 1, 2021, and Dec 31, 2023, unless there are any changes to the tax laws.<br><br>“Google Play’s 15% or 30% is applied to your proceeds, while the 2% equalization levy is applied to your proceeds plus the 15% or 30% service fee,” says Google in the email.<br><br>“We will display both fees on the Google Play Console and will begin services tax invoicing and remitting in July. The services tax rate, invoicing, and remittance are subject to change as required by law or regulations,” the message further reads.<br><br>The 2% tax is expected to affect thousands of Indian developers selling apps and in-app purchases via Google Play.<br><br>For instance, Google’s cut on paid apps is 30% of the app’s earnings. On top of that, there is 18% Goods and Services Tax levied on the 30%. With the new tax in place, the 2% tax will now be levied on the app’s earnings.<br><br>For example, an Indian developer selling an app via Play Store priced at Rs 100 will receive only Rs 58.82 (exclusive of GST).<br><br>The company is asking developers to verify their permanent account numbers (PAN) via their Play Console to receive payment.<br><br>Indian developers have complained they would be losing another 2% of their earnings from July 1 due to Google’s decision to comply with the new tax law. Some have called for a fair share of apps and in-app purchases on the Play Store.<br><br>However, it’s worth mentioning that Google has said the 2% tax would apply only on Indian developers.<br><br>“We are adding a 2% fee to what we collect (and not what you earn). This is only for developers registered in India and not for developers registered outside of India,” says a Google spokesperson.<br><br>The rationale behind the 2% tax is that India loses a lot of taxes paid by Indians who buy goods and services from digital companies that do not have a physical presence in the country.<br><br>The government believes the new tax law can help collect taxes from Indian consumers that have been evading them so far.<br><br>While the new tax law aims to recover some much-needed revenue by targeting digital multinational corporations (MNCs), industry insiders believe the additional tax will burden digital businesses.<br><br>The new tax also underscores the challenges digital services face in navigating a wide range of regulatory regimes worldwide.