India To Slap Retrospective Tax On Amazon For Cloud Services Fee Paid To The US

In what appears to be another trouble brewing for Amazon, Indian tax officials now plan to levy tax on cloud services fees paid by the ecommerce major to the US.

The new rules are said to have been conveyed to Amazon, earlier this month, and could result in ‘significant’ amounts of taxes for the company. The company will be liable to pay taxes for a period that could stretch to a couple of years prior to the date of order. 

It is not immediately clear which specific tax authority passed the new order involving Amazon.

“In February 2023, we received a decision by the Indian Tax Authority (ITA) that tax applies to cloud services fees paid to the U.S. 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,” Amazon said in its annual report filed with the Nasdaq. 

The company contended that it believed the tax authority’s decision to be ‘without merit’ and would defend its position vigorously.

The ecommerce major further told its shareholders that it would have to remit taxes, as per the order, until the matter is resolved. However, the US-based company expects to recoup the losses. 

“If this matter is adversely resolved, we would reflect significant additional tax expense, including for taxes previously paid,” Amazon said.

The move comes at a time when the startup is already in the line of fire from critics after recent layoffs, which impacted employees across the globe, including India. 

This is not the company’s first brush with the law in the country. Earlier last month, the Central Consumer Protection Authority (CCPA) issued notices to the ecommerce major for selling substandard toys.

Besides, the company is also the subject of an anti-competition probe launched by the Competition Commission of India (CCI). Such has been the scrutiny around the company that the competition watchdog also raised multiple premises connected with the ecommerce giant in April last year.

The subsidiary under scrutiny appears to be Amazon Web Services (AWS), which offers cloud services to businesses and users across the country. 

The company has invested more than $3.71 Bn in strengthening its cloud infrastructure in the last six to seven years.

All eyes are now on Amazon as it remains to be seen if it challenges the matter before courts or does it lobby with the government to get the retrospective tax slashed.