The US on Wednesday announced the imposition of additional tariffs on five countries, including India, that are imposing or considering imposing a digital services tax on American e-commerce companies. 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 year-long investigation into the Digital Service Tax (DST) adopted by Austria, India, Italy, Spain, Turkey and the UK.
In the final decision of the investigation, it was decided to impose additional duties on certain goods from these countries, USTR said in a statement. However, with the imposition of this additional charge, it was suspended for 180 days. To provide additional time to complete the ongoing multilateral negotiations on international taxation in the OECD and G20 process.
In March last year, the USTR proposed retaliatory action against countries, including India, that were levying or 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. Due to which the US can also charge as much duty on Indian goods as DST is being levied on American companies in India.
After the US announcement, Indian government sources said in New Delhi that postponing the imposition of additional duty is tantamount to a DST probe on France. Where the USTR indefinitely deferred additional charges after delaying the first six months to move the negotiations forward in the OECD.
Tai said the US remains committed to building a consensus on international taxation through the OECD and G20 process. The action taken today provides an option to levy additional charges under Section 301 in the future, while providing time for negotiations to continue to progress.
It is noteworthy that the USTR started the investigation on June 2, 2020, regarding the implementation of DST on other countries including India. The initial investigation in January this year came after alleging that the DST levied by other countries, including India, was discriminatory against American digital companies and against the principles of international taxation. India, however, maintains that DST is not discriminatory at all. It seeks to ensure level playing field only in respect of e-commerce activities undertaken by entities having permanent establishment in India.
