Digital Services Tax: Big relief to these five countries including India, America suspends additional duty

The US on Wednesday announced the imposition of additional tariffs on five countries, including India, that are levying or considering imposing Digital Services Tax on American e-commerce companies. Huh. However, soon after this, an announcement was made to suspend this tax for six months. The US suspended the imposition of this additional duty for six months, giving time for the completion of multilateral negotiations on international taxation at the Organization for Economic Co-operation and Development (OECD) and the G20.

US Trade Representative (USTR) Catherine Tai issued a statement announcing the conclusion of a one-year investigation into the Digital Service Tax (DST) adopted by Austria, India, Italy, Spain, Turkey and the UK. The USTR said in a statement, “In the final decision of the investigation, it was decided to impose additional duties on certain goods from these countries. However, with the imposition of this additional charge, it was suspended for 180 days. In order to provide additional time to complete the ongoing multilateral negotiations on international taxation in the OECD and G20 process.

There was a proposal to impose an additional fee of up to 25 percent

In March last year, the USTR proposed retaliatory action against countries, including India, that were or are preparing to impose DST on US e-commerce companies. The USTR had proposed imposing an additional duty of up to 25 percent on these countries. So that the US can also charge as much duty on Indian goods as DST is being levied on American companies in India. After this announcement by the US, Indian government sources said in New Delhi that postponing the imposition of additional duty is tantamount to DST investigation on France. Where the USTR indefinitely deferred additional charges after a delay of six months earlier to move the negotiations forward in the OECD.

“The United States is committed to building a consensus on international taxation through the OECD and G20 process,” Tai said. The action taken today provides an option to levy additional charges under Section 301 in the future, while providing time to continue the progress of the negotiations.

‘DST not discriminatory at all’

The USTR started an investigation on June 2, 2020, regarding the implementation of DST on other countries including India. After preliminary investigation in January this year, it was alleged that the DST levied by other countries including India was discriminatory against American digital companies and against the principles of international taxation. India, however, says that DST is not discriminatory at all. It seeks to ensure equal opportunity only in respect of e-commerce activities carried out by entities having permanent establishment in India.


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