A decision to levy taxes on Amazon Web Services (AWS) – the ecommerce giant’s cloud services branch – has been reportedly taken by the Indian income tax authorities. Amazon stated in a regulatory filing that the decision would entail the American company paying substantial amounts in taxes including outstanding payments for the previous years.
According to the tax department, Amazon has been providing paid cloud services to Indian companies and not paying tax on the same. Tax payments for FY15 of 190.85 crore rupees and 358.27 crore rupees for FY17 had been sought by the income tax department with notices being sent in the final week of January, declared one tax officer.
The investigating officer can notify Amazon by invoking Section 147 of the Income Tax Act if it’s deemed that income tax hasn’t been paid by the American giant. As per the department, the payments received by Amazon for cloud computing services have been termed as royalties and fees for technical services (FTS). An official revealed that the amount imposed on the organization comprises interest on outstanding tax but excludes penalty.
Another official remarked that many companies are evading taxes by directing money to their holding companies in the form of royalty payments.
Amazon states that it will challenge the notice but will have to shell out significant amounts in taxes until a resolution is reached.
“In February 2023, we received a decision by the Indian Tax Authority (ITA) that tax applies to cloud services fees paid to the US. We will need to remit taxes on the services in question, including for a portion of prior years, until this matter is resolved, which payments could be significant in the aggregate,” the company stated.
Amazon claims that ITA’s allegations are baseless.
“We believe the ITA’s decision is without merit, we intend to defend our position vigorously, and we expect to recoup taxes paid. If this matter is adversely resolved, we would reflect significant additional tax expense, including for taxes previously paid,” Amazon said.
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