In a heavy blow to Indian app developers and owners, American tech giant Google said Tuesday it would charge a 30% commission to all the in-app purchases that happens on the apps present on Play Store. It also said all the apps would have to use Google’s own billing system for these purchases. In comparison to Google, external payment gateways charge about 1.5-2% commission.
“We’ve always required developers who distribute their apps on Play to use Google Play’s billing system if they offer in-app purchases of digital goods, and pay a service fee from a percentage of the purchase,” the company said in a recent blog post.
It claims that this policy is only applicable to less than 3% of developers with apps on Google Play.
“Less than 3% of developers with apps on Play sold digital goods over the last 12 months, and of this 3%, the vast majority (nearly 97%) already use Google Play’s billing,” it said. “We only collect a service fee if the developer charges users to download their app or they sell in-app digital items, and we think that is fair.”
The company said the policy would entail the purchase of features or services such as virtual currencies, extra lives, additional playtime, add-on items, characters, and avatars, as well as subscription services in fitness, game, dating, education, music, video, and other content apps.
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The tax would also be posed on app functionalities or content such as an ad-free version of an app or new features not available in the free version. Cloud software and services including data storage services, business productivity software, and financial management software will also fall under its purview.
However, it doesn’t include the purchase or rental of physical goods like groceries, clothing, housewares, and electronics or the purchase of physical services.
Google has given the time till September next year to apps on its app store to integrate its billing system.
There is an increasing resistance against Google from Indian startups which allege that the American tech giant is using its monopoly in the mobile app ecosystem to impose the expensive tax. The industry veterans believe this ‘Google tax’ will crush smaller startups which have single-digit margins.
“You look at profitability in India, most of the startups are not making money. Even if they make money, a 30% payout to one ecosystem is a very large number. I do not think any startup in India has that level of operating margin,” Amit Gupta, co-founder and CEO at mobility startup Yulu, told KrASIA. “If someone takes that much commission, the business model will not work.”
“It will badly affect us — 30% is tax, cannot be called commission!” Snehil Khanor, CEO of TrulyMadly, a dating app told local media Economic Times. “They say we provide an ecosystem but we get the downloads through ads. For many small companies, it can be an existential threat.”
Google has maintained that its move is in line with fair practices of the trade and that developers are free to use other app stores as well as their own websites to facilitate subscription or to transact with consumers.
“Android has always allowed people to get apps from multiple app stores,” the post said. “In fact, most Android devices ship with at least two app stores preinstalled.”
“Just because Google owns the gate and the gateway to the digital ecosystem of this country, they should not act arbitrarily and enforce their rules and regulations which are contrary to our country’s laws, said Vishwas Patel, Founder, CCAvenues and Chairman, Payments Council Of India.
He said Google cannot force Indian apps developers and owners, selling digital services, to compulsorily use the Google billing and payment system and charge a 30% commission and that it should not reject Indian apps that are using payment aggregators and payment gateways recognized by the central bank.
“Google should not exercise its dominant position, rather allow a level playing field for everyone in the ecosystem,” he added.
This comes almost two weeks after Google suspended Indian payments services Paytm’s app for a few hours for violating its cashback and anti-gambling policies. Later, it reinstated the app on the Play Store.