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Facebook India’s net profit rises 40% in FY 2017-18

Facebook India’s net profit rises 40% in FY 2017-18
By Sachin Dave, Anumeha Chaturvedi, ET Bureau|Updated: Dec 25, 2018, 06.22 AM IST 
 
Facebook India’s profit jumped about 40% to Rs 57 crore in the year ended March 2018, reflecting the increasing adoption of social media in a country where data costs have reduced drastically. 
 
The company’s total revenue in India surged 53%. The social media major in a financial statement said that the services it provided to the US parent company helped drive growth. Revenues also represent the money Facebook earned from WhatsApp, the messaging application. 
 
The company’s total revenues stood at Rs 521 crore for FY18, compared with Rs 407 crore in the corresponding period a year before. 
 
The financial statement said the company faces several tax issues in India. The company has pending disputes related to income tax, VAT, sales tax, customs and excise and service tax, as per the financial statement. 
 
An email query sent to Facebook India did not elicit any response. 
 
Industry experts say that the figures may not accurately show the company’s earnings from the country. “This may not accurately reflect the revenues of Facebook from India on account of online advertising,” said Amit Maheshwari, partner, Ashok Maheshwary and Associates LLP. 
 
According to the company’s financial statement, the figures only represent services the India unit provides to the US company. The Indian arm is operated through a Singapore registered company. 
 
As per the latest Magna 2019 forecast (released on December 5), digital advertising is expected to touch Rs 18,802.3 crore, from Rs 14,162.2 crore in 2018. Google and Facebook corner more than 65% of the Indian digital advertising spend. 
 
The way Facebook India Online Services is set-up and structured in India is that it provides ‘strategic support’ to Facebook, USA, the ultimate holding company and its affiliates. The company has listed related party transactions with its holding company in Singapore and also Facebook Ireland. 
 
In the past two years, the Indian government has been keen to tax online majors like Facebook and Google that earn from India through advertising. The government has introduced equalisation levy — colloquially known as Google tax — where a 6% tax is applicable on domestic advertising revenues. 
 
Sources in the tax department say most of the equalisation levy collections come from three major players — Google, Facebook and LinkedIn. 
 
Many global companies, including Facebook, have faced scrutiny from several countries over tax planning. 
 
The Indian tax authorities have sought information from several multinationals including Facebook as per principles adopted at the multilateral Organisation for Economic Cooperation and Development (OECD) under BEPS (Base Erosion and Profit Shifting) to prevent tax evasion. Companies will be required to submit their global revenues, profits, employee numbers and taxes paid in each jurisdiction. 
 
The total expenses stood at Rs 444 crore, compared with Rs 285 crore in FY17, an increase of 56%. Legal charges increased to Rs 78 crore from Rs 43 crore. 
 
According to the filings, Facebook Singapore holds 99.99% of the ownership of the India unit and Facebook Global 0.01%. According to the financial statements, the remuneration of former Facebook MD Umang Bedi was Rs 5.9 crore. 
 
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