Digital Economy and Indian Taxation Law: An Analysis

Abstract

The world today is driven by digital transformation which causes changes to take place at a rapid pace. Digital transformation is about using the latest technology to do tasks better and in an efficient way. It is about replacing conventional processes with digital processes and replacing outdated processes by new and improved technology. The effect of this is also felt in the business world where firms use new ways of interacting with their customers and conducting their operations via digital mode. Firms operate digitally without either having a permanent establishment or place of work or having any physical whereabouts are distributed across the world and located in different time zones. As they have no physical whereabouts, the main issue arises from the point of view of the Income Tax authorities to oversee taxpayer compliances of these companies in order to determine which tax regulations they ought to pay by virtue of and to make sure they pay their taxes and do not avoid paying it by virtue of operating out of different countries online. This study seeks to delve into the aspect of imposing taxes on the companies operating in the digital economy from the global perspective followed by the implementation of it in the Indian context along with its benefits, challenges and solutions to it. Further concluding with the way forward for India with respect to taxing these companies in comparison to the international trends.