The other counties under investigation included Italy,  Turkey, UK, Spain and Austria.

A statement from the office of the USTR said that  in January it was found that digital service taxes (DST) 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  the principles of international taxation, and burdened US companies.

USTR is proceeding with the public notice and comment  process on possible trade actions to preserve procedural options before the conclusion of the statutory one-year time period for completing the investigations.

"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," said 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."

Among the proposed actions, the Joe Biden administration  has proposed to impose retaliatory tariffs up to 25 per cent on around 40 Indian products including shrimps, basmati rice, gold and silver items.

The 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, according to official sources.

With regard to India, the investigation was targeted  on the 2 per cent equalisation levy (EL)levied by India on e-commerce supply of services. The investigation included whether the EL discriminated against US companies, was applied retrospectively, and diverged from U.S or international tax norms due to its  applicability on entities not resident in India.

The U.S. requested for bilateral consultations in  this matter, and India submitted its comments to the USTR on 15 July 2020, participated in the bilateral consultation held on 5 Nov 2020.

India made a strong case that the levy 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 also clarified that the equalisation levy 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.

India based e-commerce operators are already subject  to taxes in India for revenue generated from Indian market. However, in the absence of the levy, non-resident e-commerce operators, not having any permanent establishment in India but with 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.