New Delhi to look at proposal, plan appropriate measures: Digital tax; India amongst nations more likely to face retaliatory US tariff

The United States has proposed retaliatory motion towards India’s digital companies taxation of e-commerce operators that embrace levying tariffs. New Delhi has stated it’ll study the proposed motion and take “suitable measures” protecting its personal commerce and industrial pursuits in thoughts.
The proposal follows investigations by the United States Trade Representative (USTR) into digital companies tax (DST) adopted or into account in 10 jurisdictions, together with India, Indonesia, the UK, Brazil and the EU, on June 2, 2020. The investigations have been initiated below part 301 of the US Trade Act, 1974.
In January, the USTR issued experiences on DSTs adopted by India, Austria, Italy, Spain, Turkey and the UK following “comprehensive investigations”, together with consultations with the international locations topic to investigation and consideration of public feedback.
In the case of India, the USTR’s proposed plan of action consists of extra tariffs of as much as 25 per cent advert valorem on an combination degree of commerce that might acquire duties on items of India within the vary of the quantity of DST that India is predicted to gather from US corporations. Around 40 items are within the preliminary checklist of merchandise that might be topic to the extra tariffs.
This consists of shrimps, basmati rice, cigarette paper, cultured pearls, semi valuable stones, silver powder and silver articles of bijou, gold blended hyperlink necklaces and neck chains and sure furnishings of bentwood.
“Initial estimates indicate that the value of the DST payable by US-based company groups to India will be up to approximately $55 million per year,” acknowledged the USTR’s report.
“In January, USTR found that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom were subject to action under Section 301 because they discriminated against US digital companies, were inconsistent with principles of international taxation, and burdened US companies,” the workplace of the USTR stated.
“The United States is committed to working with its trading partners to resolve its concerns with digital services taxes, and to addressing broader issues of international taxation,” stated USTR Ambassador Katherine Tai. “The United States remains committed to reaching an international consensus through the OECD process on international tax issues. However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs,” acknowledged the workplace of the USTR.
The NDA authorities had moved an modification within the Finance Bill 2020-21 imposing a 2 per cent digital service tax on commerce and companies by non-resident e-commerce operators with a turnover of over Rs 2 crore, successfully increasing the scope of equalisation levy that, until final 12 months, solely utilized to digital promoting companies. The new levy got here into impact from April 1. E-commerce operators are obligated to pay the tax on the finish of every quarter.

“Government of India will examine the proposed action with the stakeholders concerned and would take suitable measures keeping its trade and commercial interest of the country and overall interest of its people,” stated a supply from the Ministry of Commerce and Industry.“India made a strong case that the equalization levy (EL) is not discriminatory and only seeks to ensure a level-playing field with respect to e-commerce activities undertaken by entities with permanent establishment in India. It was also clarified that the EL was applied only prospectively, and has no extra-territorial application, since it is based on sales occurring in the territory of India through digital means,” the supply stated.
“India based e-commerce operators are already subject to taxes in India for revenue generated from Indian market; however, in the absence of the EL, non-resident e-commerce operators (not having any Permanent Establishment in India but significant economic presence) are not required to pay taxes in respect of the consideration received in the e-commerce supply or services made in the Indian market,” the particular person stated.

“The purpose of the Equalization Levy is to ensure fair competition, reasonableness and exercise the ability of governments to tax businesses that have a close nexus with the Indian market through their digital operations. It is a recognition of the principle that in a digital world, a seller can engage in business transactions without any physical presence, and governments have a legitimate right to tax such transactions,” the supply added.