USTR defers punitive tariff against India’s digital tax

NEW DELHI:  The United States Trade Representative (USTR) has deferred by 180 days the punitive tariff it plans to levy on countries like India, Austria, UK, and Spain for imposing a tax on digital services provided by the online platforms of foreign companies.

The USTR, which is responsible for developing and coordinating the US’ international trade, commodity, and direct investment policy, and overseeing negotiations with other countries, has said in a statement that the tariff has been suspended to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and G20. 

The statement added that its one-year investigations of digital service taxes (DSTs) have concluded and “the final determination... is to impose additional tariffs on certain goods from these countries”.

On June 2020, USTR initiated investigations into the digital services tax adopted or under consideration in ten jurisdictions: Austria, Brazil, the Czech Republic, European Union, India, Indonesia, Italy, Spain, Turkey, and the UK.

The US Trade Representative had found India’s 2 per cent equalisation levy on online platforms based in foreign countries unreasonably contravening international tax principles and specifically discriminating against US digital companies. 

However, India has maintained that it is the sovereign right of the parliament to tax certain transactions if origin of those transactions is from within India.