Global tech, trade bodies urge India to debate on equalisation levy

A group of global trade and technology industry associations have urged the Indian government to hold formal stakeholder consultations on amendments to the Equalisation Levy, which they fear would expand the scope of the tax and would adversely impact the ease of doing business.

The group of over a dozen global industry bodies including the Information Technology Industry Council (ITI) wrote to the chairman of the Parliamentary standing committee on Finance, Jayant Sinha urging the Parliament to drop amendments to the equalisation levy included in the budget for FY22.

The amendment would create significant challenges for all businesses operating in India, further exacerbating the detrimental impact of a measure at odds with India’s ongoing commitment to the multilateral negotiations at the OECD/ G20 Inclusive Framework to address tax challenges arising from the digitalisation of the global economy, the industry associations said in the letter, which was seen by FE.

“It is in the spirit of support for a multilateral solution that we encourage the Parliament to refrain from adopting the amendment proposed to sections 163-165A of the Finance Act, 2016, which, despite its characterisation by Ministry of Finance as clarifications and an amendment, would fundamentally expand the scope of equalisation levy and generate a range of new compliance questions and concerns,” the associations said.

They urged the government and the business community invested in India to engage in a dialogue to ensure that policies can achieve the government’s intended short and long-term objectives and to include firm’s affected by the measure in those discussions.

“Particularly given the lack of wider public consultation before the introduction of the expansion of equalisation levy as part of union budget 2020-21, we request that the Government of India convene formal stakeholder consultations before further consideration of the recently proposed amendments,” they added.

The associations fear that continued and growing uncertainty impacts foreign companies’ ability and willingness to invest in India.

“Instead of advancing the proposed amendments, we encourage the Government of India to forgo further expansion of equalisation levy and instead prioritise India’s continued support for the multilateral negotiations to address the tax challenges arising from the digitalisation of the global economy,” the associations suggested.

Besides ITI, the signatories include Asia Internet Coalition, Keidanren, Internet and Mobile Association of India, Japan Electronics and Information Technology Industries Association, US Chamber of Commerce, US-India Business Council, US-India Strategic Partnership Forum and techUK.