Express news service
NEW DELHI: The success of the global tax treaty will pave the way for Indo-US trade negotiations that were stuck on digital tax, Commerce Ministry officials say. “The digital tax imposed on large American multinationals like Google, Facebook, Amazon was one of them. stumbling block during trade negotiations between the two countries. After the success of the global tax treaty, this issue will be automatically resolved and will pave the way for further negotiations, ”said a senior trade ministry official.
India imposed a 2% equalization tax from April last year on the profits in the country of foreign tech and e-commerce companies like Amazon, Facebook and Google. The administration of former President Donald Trump opposed it, and he has repeatedly flagged the concerns, halting trade talks. In 2018, Trump imposed a 25% tariff on steel and aluminum imports from India. In 2019, Trump withdrew special treatment for some Indian exports, mostly low-tech items and handicrafts, under the General System of Preferences (GSP) which exempted them from import duties.
Later, even the Biden government re-energized the tariff war against India with retaliation against the digital tax.
In June 2020, the USTR opened investigations into the adopted or contemplated digital services tax in ten jurisdictions: Austria, Brazil, Czech Republic, European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom. The U.S. Trade Representative had concluded that India’s 2% equalization levy unreasonably violates international tax principles and specifically discriminates against U.S. digital businesses. On June 2 this year, U.S. Trade Representative Katherine Tai announced plans to increase tariffs by 25% on 26 items from India – from shrimp and basmati rice to furniture and jewelry – in retaliation for the imposition of the Digital Services Tax (DST) in New Delhi. on the tech giants. “Estimates indicate that the value of DST payable by US-based business groups to India will be around $ 55 million per year,” Tai said. But in announcing it, Tai added that the treks will be suspended until December.
Explaining the reason for the suspension of increases for the six countries, Tai said it was to help international tax negotiations. to tax large multinationals doing business in the country, without a physical presence or permanent establishment, at 20 percent of their profits. The framework gained approval from G7 leaders last month and is expected to be presented at the finance ministers meeting of the G20 major economies group in Venice next week.