In a big win for startups in India and around the world, Google has decided to slash the service fee it charges from the developers on Play Store from 30% to 15%.
The US tech giant was facing backlash from all over the world including India. The company was closely monitored by regulators from different countries. A group of founders of fifteen startups reached out to the Competition Commission of India complaining about the excessive service fee Google charges. Similarly, a subcommittee of the US parliament found out that tech companies like Google and Facebook aren’t contributing much in creating a competitive market. Google came under pressure when Apple announced a similar cut-off in service fees from January 1, 2021.
According to the announcement service charge will be 15% of the earnings from selling goods and services on the Play Store. The deduction in the charge is said to give relief to startups and businesses as the saved monies could be used in advertisements, promotions, hiring, and other necessary services.
This reduction in service is applicable to developers with annual revenue of $1 million or less. However, developers with revenue greater than $1 million will have to bear a tax rate of 30% only.
This means if the earnings of a developer exceed $1 million he will be taxed 30% on the exceeding amount and not on the complete amount. The new tax policy will be applicable from 1st July 2021.
Google charges service tax from the developers who offer to sell in-app digital services. According to Google 99% of the developers across the globe who are engaged in selling digital goods & services will benefit from the aforementioned tax reduction as their annual revenue is lesser than the $1 million marks. On the other hand, 97% of the application developers do not sell any kind of digital goods or services.
It is interesting to note that worldwide application download increased 45% in the years 2016 to 2019. On the other hand, application download in India saw a surge of whooping 190% in these years.