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US sets, then suspends tariffs on India, 5 others over digital taxes

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The United States government on Wednesday announced further suspension of punitive tariffs for six months on India, Austria, Italy, Spain, Turkey, and the United Kingdom while it continues to resolve the digital services taxes investigation amid the ongoing multilateral negotiations at the OECD and in the G20 process.

“The US is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes. The US remains committed to reaching a consensus on international tax issues through the OECD and G20 processes. Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future,” US Trade Representative Katherine Tai said.

The suspension came after the conclusion of a year-long investigation into taxes which the US has stated are against tech companies like Apple, Amazon, Google and Facebook. In January 2021, following investigations, the USTR determined that the digital services taxes adopted by Austria, India, Italy, Spain, Turkey, and the UK discriminated against US digital firms.

The US Wednesday announced 25 per cent tariffs on over $2-billion imports from these six countries, but then immediately suspended the duties to allow time for international negotiations.

In case of India, USTR’s proposed course of action includes additional tariffs of up to 25 per cent ad valorem on an aggregate level of trade that would collect duties on goods of India in the range of the amount of DST that India is expected to collect from US firms.

Around 26 categories of goods are in the preliminary list of products that would be subject to the additional tariffs. This includes shrimps, basmati rice, cigarette paper, cultured pearls, semi precious stones, silver powder and silver articles of jewelry, gold mixed link necklaces and neck chains and certain furniture of bentwood. Initial estimates indicate that the value of the DST payable by US-based company groups to India will be up to approximately $55 million per year, the USTR report said.

The NDA government had moved an amendment in Finance Bill 2020-21, imposing a 2 per cent digital service tax on trade and services by non-resident e-commerce operators with a turnover of over Rs 2 crore, effectively expanding the scope of equalisation levy that, till last year, only applied to digital advertising services.

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