Digital tax controversy: US cancels additional tariffs on India

(PTI) Washington / New Delhi, Dt

The United States on Wednesday announced the imposition of a digital service tax on six countries, including India, but soon withdrew it for six months with immediate effect. The United States has announced it will impose a digital tax on countries that impose or are considering imposing a digital service tax on American e-commerce companies, but has withdrawn it. The United States has given these countries more time to complete the ongoing multilateral talks on the Organization for Economic Co-operation and Development (OECD) and international taxation in the G20.

United States Trade Representative (USTR) Catherine Tai announced the completion of a one-year investigation into the Digital Service Tax (DST) adopted by India, Austria, Italy, Spain, Turkey and Britain. The USTR said the final decision in the investigation was to impose additional charges on some of these countries' goods. In addition to this additional charge, he was also suspended for 150 days. So that the OECD and the G20 process have more time to complete the ongoing multilateral negotiations on international taxation.

In March last year, the USTR proposed retaliation against countries, including India, that had imposed or were preparing to impose DST on US e-commerce companies. The USTR had proposed an additional tax of up to 5 per cent on these countries, which would allow the US to levy as much tax on Indian goods as US companies are levying DST in India.

Following the US announcement, Indian government sources said in New Delhi that deferring the additional charge was tantamount to a DST probe into France. Where the USTR suspended the additional charge indefinitely after a delay of the first six months to proceed with the talks at the OECD. Tai said the United States is committed to building a general consensus on international taxation through the OECD and the G20 process. Today's proceedings provide time for the negotiations to continue and provide an option to impose additional charges under Section 201 in the future.

The USTR launched an investigation on June 7, 2020 to impose DST on other countries, including India. After a preliminary investigation in January this year, it was alleged that the DST imposed by other countries, including India, was discriminatory against American digital companies and against the principles of international taxation. However, India says DST is not discriminatory at all. It seeks to provide an equal opportunity only in relation to e-commerce activities carried out by permanently established organizations in India.