US begins probe into digital services tax

Tribune News Service
New Delhi, June 4

India will have to take another setback in its stride when it attempts to sign a limited trade deal with the US, as indicated by Indian Ambassador to the US Taranjit Singh Sandhu.

After the US scrapped zero duty preference on some Indian imports and arm-twisted India into purchasing shale oil, Washington has now started a probe into digital services taxes, either adopted or being considered by 10 countries, including India.

The sticking point

The United States Trade Representative (USTR) is against the latest Indian Budget expanding the scope of the equalisation levy to revenues generated by non-resident e-commerce firms operating in India. India is no stranger to USTR investigations, having been probed several times on various grounds

The United States Trade Representative (USTR) will conduct the probe under Section 301 of the Trade Act.

India, however, will get the opportunity to defend the tax. India is no stranger to USTR investigations, having been probed several times on various grounds.

“President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies. We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination,” said USTR Robert Lighthizer in a statement.

Four years ago, India levied 6 per cent tax on for advertisements hosted on off-shore businesses like mobile phone apps, social media platforms and digital content streaming services. This was fine with the USTR. But it has opposed the latest Union Budget expanding the scope of the equalisation levy (tax) to revenues generated by non-resident e-commerce firms operating in India. Though the levy is two just 2 per cent, the US is keen on a probe.