Google tax is not the tax on Google Inc. But it is the tax on income generated by any foreign company from the country other than its origin. Like Instagram generates revenue from India, tax payable by Instagram(FB) to Indian Govt. on its revenue from India is Google tax.
The Indian Context
Google tax introduced in India by Finance Act 2016, and Equalisation levy @ 6% imposed on certain digital transactions like online advertising and related service provided to the Indians by a foreign company not having a permanent establishment in India. For example, an Indian company gives advertisement through Facebook or Google, which generates revenue for Facebook and Google from India.Levy @6% required to be deducted by service receiver- payer.
2020 brings another change.
From April 1, 2020, GOI( Govt. Of India) introduced new Equalisation levy @2% on revenue generated by non-resident e-commerce operator, as per the conditions mentioned. This levy is required to be paid by the e-commerce operator and not by purchaser or service receiver. For example, Amazon has to pay equalisation tax @ 2% on online sales generated from India.
Important Source of Revenue
GOI generated an income of more than 1000 crore from equalisation levy in 2018-19. And with the ever-growing trillion-dollar digital economy, google tax will be an important source of revenue for GOI.
However, the levy of equalisation tax is raising concerns of the foreign companies, e-commerce operators and the US Govt. Because as much higher the levy, that much reduction in revenue of foreign companies. Hence, the Indian Govt.is analyzing the middle path. So that along with the tax revenue, the country can also attract global companies for trade.