USTR to act against DST imposed in India, other nations

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Washington, USA: The USTR will take further steps against India and five other nations for levying DST (digital services tax). India is among the group of six nations including Austria, Italy, Spain, Turkey and the UK that have introduced the DST in recent years.

These six countries are subject to potential action for imposing DST on non-resident companies that earn revenues from offering a wide range of digital services and sales. Most of them are large tech and e-commerce companies such as Google, Amazon and others.

India is among the six nations that have introduced DST. However, the US has objected to the new digital services taxes imposed by these nations, calling it discriminatory and violating rules of international taxation and burdening US-based companies.

In the wake of DST, the USTR (United States Trade Representative) under the Trump administration last June had initiated investigations of DSTs in 10 nations that had implemented or were considering digital service taxes. These nations include Austria, India, Italy, Spain, Turkey, the United Kingdom, Brazil, the Czech Republic, the European Union (EU) and Indonesia.

The USTR over the week said it will take further steps in its Section 301 investigations of Digital Service Taxes (DSTs) adopted or under consideration by ten U.S. trading partners.

As per its report in January, the USTR found that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom were subject to action under Section 301. They discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies.

Hence it is proceeding with the public notice and comment process on possible trade actions to preserve procedural options before the conclusion of the statutory one-year time period for completing the investigations.

“The United States is committed to working with its trading partners to resolve its concerns with digital services taxes, and to addressing broader issues of international taxation,” said Ambassador and US Trade Representative Katherine Tai in a statement.

“The United States remains committed to reaching an international consensus through the OECD process on international tax issues. However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs,” added Tai.

Although the USTR has announced further steps of Section 301 Digital Services Taxes investigations, it is also engaged in talks with Indian officials and representatives. Tai had discussed this trade-related issue with Piyush Goyal, India’s Commerce and Industry Minister.

“They committed to strengthening cooperation on shared objectives and to revitalise engagement through the US-India Trade Policy Forum. They also agreed to work constructively to resolve key outstanding bilateral trade issues and to take a comprehensive look at ways to expand the trade relationship,” the USTR briefed on the phone call between two US and India officials.

While the six nations including India have already imposed DST, four other countries – Brazil,the Czech Republic, the European Union (EU) and Indonesia are yet to adopt or implement DST. But they were considering DST when the investigations begun.

However, the USTR said that it will close investigations against these four nations but will proceed with further steps against the six countries including India that imposed DST.

India’s DST also called Equalisation by the US, imposes a two per cent tax on revenue earned from a wide range of digital services offered in the country. These digital services include digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service and others

The USTR probe of DST in India has highlighted three key points in its report. It found that India’s DST discriminates against U.S. digital services companies as it exempts local or resident companies offering the same type of digital services. It said that India’s DST unreasonably contravenes international tax principles and burdens or restricts U.S. commerce.

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