US Alerts India of Potential Backlash for Its Ecommerce Policy and Digital Tax

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US Alerts India of Potential Backlash for Its Ecommerce Policy and Digital Tax

US sends words of caution to India on Google Tax

Tuesday, 28th April 2020

A digital tax, popularly known as ‘Google tax’ that was introduced by the Government of India way back in 2016, for tech giants, has now been extended to ecommerce products and companies. US authorities however have raised exceptions at certain clauses of the revised ecommerce policy of India asking it to reassess them.


The main concern of the US authorities lies in the specific sections of the policy whereby greater preference is being given to domestic products over and above foreign establishments. They have even made the Indian government wary of possible implications if it went ahead with the 6% equalization levy on overseas online advertising platforms.


The tax implies that any particular body that enters into a transaction worth over INR 1 lakh with another body outside of the country for B2B requirements are to pay the said equalization tax. The tax has been in place for four years now and applies to those companies that do not have a permanent establishment in India. The equalization levy has now been extended to all overseas electronic commerce transactions that originate from India.


This policy also includes other matters such as the need for data localization, limitations to be imposed on cross border data flow, proprietary source code and expanded grounds for forced transfer of intellectual property.


US also pointed out that apart from a meagre exception for food and single-brand retailers meeting certain conditions, the policy impedes several e-commerce businesses from serving the Indian market. Although it permits cent per cent FDI in B2B businesses, it restricts foreign investment in the B2C trade.


The report submitted by the US authorities further rue the fact that despite it seeking several opportunities to improve the access of US companies over the Indian market, they continue to face difficulties related to tariff and non-tariff barriers mainly in the dairy and poultry sectors. All these cause huge delays in the import of goods into India.


The take of Washington on the current policy is that the tax structure is in a total disregard of the internationally accepted principles that lay down the path for digital transactions. They state that it ought to be developed on a multilateral basis in order to prevent double taxation.



Source: Economic times

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