Quick Summary
The U.S. administration had announced initiation of investigation under section 301 of the U.S. Trade Act, 1974 against the taxation on digital services adopted or under consideration by countries, including the Equalisation Levy applied by India. Other counties under investigation include Italy, Turkey, and United Kingdom. With respect to India, the focus of the investigation was on the 2% Equalisation Levy (EL) levied by India on e-commerce supply of services. The U.S. investigation include
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FAQ :
The Equalisation Levy is a 2% tax applied to non-resident e-commerce operators who do not have a permanent establishment in India but generate revenue from sales within India. It has a threshold of Rs. 2 crores and applies equally to all global operators with business in India.
The US administration initiated an investigation under Section 301 of the US Trade Act, 1974, to examine if India's Equalisation Levy discriminated against US companies, was applied retrospectively, or deviated from US or international tax norms.
India argues that the Equalisation Levy is not discriminatory. Instead, it aims to ensure a level playing field for Indian e-commerce companies and non-resident operators without a permanent establishment in India but with significant economic presence.
No, India clarified that the Equalisation Levy was enacted before its effective date of April 1st, 2020, meaning it is applied prospectively and not retrospectively.
No, India stated that the levy has no extra-territorial application as it is based solely on sales occurring within the territory of India through digital means.
On January 6th, 2021, the US USTR released findings concluding that India's Equalisation Levy is discriminatory and restricts US commerce.
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