US suspends tariffs imposed on India & five others in a Digital Tax Dispute

On June 2, 2020, US Trade Representatives  (USTR) initiated investigations into Digital Services Tax adopted or under consideration in ten jurisdictions: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.  In January 2021, following comprehensive investigations USTR determined that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies.

India has adopted a DST that imposes a two per cent tax on revenue generated from a broad range of digital services offered in India, including digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service, and several other categories of digital services. India’s DST only applies to “non-resident” companies. On June 2, 2020, the U.S. Trade Representative initiated an investigation of India’s DST pursuant to section 302(b)(1)(A) of the Trade Act of 1974, as amended (Trade Act).

The suspension of the retaliatory tariff on Austria, India, Italy, Spain, Turkey, and the United Kingdom comes at the end of one-year Section 301 investigations by the US. In June last year, the US began investigations into the matter and in January this year, it found DST discriminated against the US companies claiming that it is inconsistent with principles of international taxation. In March, the USTR announced proposed trade actions in these six investigations and undertook a public notice and comment process.

President Joe Biden’s administration is advancing for a 15 per cent global minimum corporate tax that aims to resolve the issue of corporations sheltering profits in low-tax nations.

Image Source: The Indian Express