India to defend Equalisation Levy as a level-playing tax

India will defend its Equalisation Levy, which is a non-discriminatory cost utilized prospectively to make sure a level-playing area for e-commerce entities having everlasting institutions within the nation, two officers mentioned on Saturday after the USA Commerce Consultant (USTR) proposed retaliatory commerce actions towards India.

The USTR on Friday proposed the actions towards India and another international locations which have imposed or are contemplating imposing digital service taxes (DSTs) or equalisation levy (EL) below part 301 of the Commerce Act of 1974 on grounds of discrimination towards the US-based digital firms. Retaliatory actions may embody withdrawal of US commerce concessions and better duties on Indian exports.

The federal government will look at the proposed motion with the stakeholders involved and take appropriate measures in step with its commerce and industrial curiosity and general curiosity of its individuals, the officers mentioned requesting anonymity.

“All e-commerce firms positioned in India pay taxes, however remotely positioned overseas digital companies, who’re producing important revenues from the Indian market, don’t pay any tax in India. This places companies positioned in India at a drawback, therefore a 2% EL was imposed on remotely-located companies,” a second particular person mentioned.

The USTR’s proposed transfer is focused on the 2% EL levied by India on the e-commerce provide of providers. On March 26, it additionally prescribed related actions towards the UK, Austria, Italy, Spain, and Turkey.

“USTR is continuing with the general public discover and remark course of on potential commerce actions to protect procedural choices earlier than the conclusion of the statutory one-year time interval for finishing the investigations,” it mentioned in a press release.

In January, USTR discovered that the levy adopted by Austria, India, Italy, Spain, Turkey, and the UK have been topic to motion below Part 301 as a result of they discriminated towards US digital firms, have been inconsistent with ideas of worldwide taxation, and burdened US firms.

On the US request for bilateral consultations on this matter, India submitted its feedback to USTR in July and November. “It was additionally clarified that the EL was utilized solely prospectively with no extra-territorial software since it’s primarily based on gross sales occurring within the territory of India by means of digital means,” the official quoted above mentioned.

The EL fastened at 2% is relevant to non-resident e-commerce operators not having a everlasting institution in India. The brink for this levy is 2 crore, which could be very average and applies equally to all e-commerce operators throughout the globe having enterprise in India, he mentioned.

“The levy doesn’t discriminate towards any US firms because it applies equally to all non-resident e-commerce operators, regardless of their nation of origin.”

The Equalization Levy recognises the precept that in a digital world, a vendor can have interaction in enterprise transactions with none bodily presence, and governments have a authentic proper to tax such transactions, the official mentioned.

“There is no such thing as a retrospective factor because the levy was enacted earlier than the first day of April 2020 which is the efficient date of the levy. It doesn’t have extraterritorial purposes because it applies solely to the income generated from India. As well as, EL was one of many strategies instructed by 2015 OECD/G20 Report on Motion 1 of BEPS Venture which was aimed toward tackling the taxation challenges arising out of digitisation of the financial system,” the commerce ministry mentioned in a press release issued in January.

The assertion was issued in a response to USTR’s findings on the part 301 investigation into India’s EL.

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