We missed this earlier: The Office of the United States Trade Representative (USTR) has proposed retaliation against India and other countries that have proposed or implemented digital service taxes (DST)/equalisation levy regimes. The USTR has issued notices seeking comments from six countries — India, Austria, Italy, Spain, Turkey and the United Kingdom.
As retaliation, the USTR has suggested the imposition of 25% ad valorem taxes on the import of a range of products from India including sea-food, basmati rice, bamboo articles, rattan furniture jewellery, pearls, and semiprecious stones.
These taxes will supposedly fetch the US government around $55 million, the amount the Indian government will reportedly collect from US-based companies through the equalisation levy.
Katherine Tai, the incumbent USTR, said in a statement that while the US is committed to reaching an international consensus through OECD on international tax issues, it will continue to take actions under Section 301 of the US’s Trade Act and even impose tariffs when necessary.
At the start of the year, the USTR — under the Trump administration — had published a report criticising India’s decision to impose an equalisation levy of 2% on digital services. The report called the levy “discriminatory on its face”, adding that the Indian law explicitly targets non-Indian forms. In a rebuttal, the Indian government defended itself by saying the equalisation levy was only to ensure fair competition and to exercise the ability to tax businesses with a close nexus to India.
In the investigation document pertaining to India, the USTR has asked the Indian government and other stakeholders to submit written comments before April 30, 2021 on potential trade actions. It said that it will also allow for hearings on rebuttals, presumably from the Indian government. Presently, it ask asked for comments on how India’s DST will impact US-based companies, including their compliance burden, and whether the inclusion products on whom the tariffs could be imposed is justified.
Also read:
- US Trade Representative Publishes Report Blasting India’s 2% Equalisation Levy
- “Equalization Levy Ensures Fair Competition”: Indian Govt Defends Against US Trade Representative’s Critical Report
- Government Says It Has ‘No Obligation’ To Take Action On USTR Report On Counterfeiting By Indians On E-Commerce Platforms
