AgenciesThe United States Trade Representative (USTR) has determined that digital services taxes adopted by India discriminated against American companies and inconsistent with international tax principles, in a report issued Wednesday, but stopped short of taking specific actions saying it "will continue to evaluate all available options."
The USTR, in its findings, said that India’s 2% equalisation levy is imposed on revenue generated from a broad range of digital services offered in the country, including digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service, and several other categories of digital services and applies only to “non-resident” companies.
“The US Trade Representative has determined that India’s Digital Services Tax (DST) is unreasonable or discriminatory and burdens or restricts US commerce and thus is actionable under Section 301,” it said in the report.
It also determined that “India’s DST is unreasonable because it is inconsistent with principles of international taxation, including due to its application to revenue rather than income, extraterritorial application, and failure to provide tax certainty”.
It issued similar reports for Turkey and Italy. Last year, the US initiated investigations into 10 nations and blocs including India that have imposed such digital services taxes or are in the process of doing so. They include the UK, Brazil and the European Union.
The USTR said it requested consultations with India on the issues involved in the investigation and consultations were held on November 5, 2020.
The 2% equalisation levy, or so-called Google tax, came into effect from April 1, 2020. The government had earlier imposed a 6% levy on digital advertising aimed at taxing digital companies based overseas on the business they do in India.
The USTR, in its findings, said that India’s 2% equalisation levy is imposed on revenue generated from a broad range of digital services offered in the country, including digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service, and several other categories of digital services and applies only to “non-resident” companies.
“The US Trade Representative has determined that India’s Digital Services Tax (DST) is unreasonable or discriminatory and burdens or restricts US commerce and thus is actionable under Section 301,” it said in the report.
It also determined that “India’s DST is unreasonable because it is inconsistent with principles of international taxation, including due to its application to revenue rather than income, extraterritorial application, and failure to provide tax certainty”.
It issued similar reports for Turkey and Italy. Last year, the US initiated investigations into 10 nations and blocs including India that have imposed such digital services taxes or are in the process of doing so. They include the UK, Brazil and the European Union.
The USTR said it requested consultations with India on the issues involved in the investigation and consultations were held on November 5, 2020.
The 2% equalisation levy, or so-called Google tax, came into effect from April 1, 2020. The government had earlier imposed a 6% levy on digital advertising aimed at taxing digital companies based overseas on the business they do in India.
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