Tax implications of cloud computing, and everything as a service –

Posted: October 25, 2020 at 10:37 pm

By Tapati Ghose, Vijai Jayaram, and Rohit Lal

Cloud computing has made rapid strides over the years and witnessed tremendous growth. While the global cloud business is estimated to grow at a CAGR of 16.5% and reach $345 Billion by 2022, the Indian cloud computing market which was $2.5 Billion in 2018, looks more optimistic and is expected to grow at a CAGR of 30%, to become $7.2 Billion by 2022. Further, 70% of the revenue of Indian SaaS players is from exports. Key attributes of cloud computing models are on-demand provisioning, reduction in duplicity, virtual environment with almost no use of hardware, very less capex, etc.

Cloud computing services can be categorised under three heads, viz., Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

Under PaaS model,a PaaS provider usually hosts the software and hardware on its own infrastructure to provide all the facilities that are required to support the life cycle of building and delivering web applications and services.

IaaS provides a standardised way of acquiring computing capabilities over web. Such resources include network, electronic storage, virtual servers etc. IaaS helps in the delivery of computer infrastructure as a web-based service which helps companies in cutting down investment in costly infrastructure.

In recent years, data center supply ecosystem in India has expanded exponentially. Such growth in data centers is also the result of data localisation regulations which require data of Indian customers to be stored locally/ restricts data transfer outside Indian borders. IaaS is expected to grow at a CAGR of 25% to reach $2.3-2.4 Billion business by 2022.

In this context, it is important to take a closer look at the key tax issues impacting cloud computing.

The authors are Tapati Ghose, Partner with Deloitte India, Vijai Jayaram, Director at Deloitte Haskins & Sells LLP, and Rohit Lal, Manager, Deloitte Haskins & Sells LLP.

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Tax implications of cloud computing, and everything as a service -

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