Alphabet, Meta Paid Rs1,254 Cr as Levy in FY21

Local units of global technology majors Alphabet and Meta-Google India Online Services-together paid an equalization levy of Rs1254 crore in FY21, accounting for more than three-fifth of the tax collected by New Delhi under this category.

India collected a total of Rs2057 crore 85% However google India and Facebook India share in total collections fell from over 85% in FY20 to 61% The equalization levy is a 6% tax on global companies that generate online advertisement from Indian residents or non-residents companies with a permanent establishment (PE) in India. Last year, the government expended the scope to include more services, a step that would have contributed to higher collections.

The numbers signaled two trends: One digital media was growing at a fast clip and, two, competitors, especially the video platform and ecommerce companies, were also setting more attention from advertisers, when the pandemic struck, both Google and Facebook found themselves in an advantageous position as people spent more time online. With the increase in digital engagement among consumers, advertisers and agencies increased the digital focus in the marketing mix. Given their massive reach, the two biggest platforms, Google and Facebook, managed to corner a large share of the overall digital spend.

Even as other media vehicles struggled, Google and Facebook garnered advertising worth Rs23212 crore from Indian advertisers, a 28.57% increase over the corresponding year. “What we have seen in the last two years is a very high acceleration to digital. We have almost 600 million internet users and most of the platforms-commerce, social, or video – have seen increased use from consumers. This has accelerated digital play in the country,” said Prashant Kumar, CEO, South Asia at Group.

The duo’s domination in the digital advertising space has attracted regulatory intervention in Australia and France, where both are being asked to share revenue with publishers Further, Facebook has recently been roiled by revelations by a whistle-blower in the US about, among other things, it’s failure to curb hate speech.

In India the tech majors ended up paying a total of Rs20900.5 crores to their respective sister companies or parent companies for the purchase of ad inventory for onward sale to advertisers in India. And with the highest ever purchase of inventory, corresponding equalization levy payments also went up Facebook paid an equalization levy of Rs518 crore- 6% of the Rs8638.5 crores it spent on buying ad inventory from sister subsidiaries- while Google India paid an equalization levy of Rs736 crore on its Rs 12262 crore inventory purchase.

Facebook India purchases advertisement space from two subsidiaries, Facebook US and Facebook Ireland, while GIPL buys it from Google Singapore, both companies work on a reseller model. When selling to their Indian customers, Facebook India sales-an arm’s length margin for sales & marketing activities. Google India’s margin is somewhere between 12% and 13% In terms of gross advertising collections from the Indian marketing during the pandemic year, Facebook grew at a 41.04% faster rate than Google, which grew at 21.37% although on a higher base.

But experts say other viable digital advertising options are emerging. Sujata Dibbed, Group Trading Director at Amplify India, the media investment arms of Dents, said that while the duopoly of Google and Facebook exist, other options are also coming up in digital media, especially from video platforms and eCommerce. S-ET

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