India will defend its Equalization Levy, which is a fairly straightforward case used to ensure a fair playing field for e-commerce organizations with permanent institutions in the country, two officials said on Saturday after being nominated by the United States Trade Representative (USTR). trade retaliatory actions against India.
On Friday the USTR proposed actions against India and other countries that have imposed or considered imposing a digital service tax (DSTs) or equity levy (EL) under section 301 of the 1974 Commerce Act on grounds of discrimination against US digital companies. Retaliatory actions may include the revocation of US trade permits and high-level operations on Indian exports.
The government will consider the proposed action with the relevant stakeholders and take appropriate action in line with its commercial and commercial interests and the interest of all its people, officials said requesting anonymity.
A second person said that all the e-commerce companies in India pay taxes, but the remote digital firms, which generate significant revenue from the Indian market, do not pay taxes in India. This puts the industry in India at risk, which is why 2% EL has been found in remote factories.
USTR’s proposed move is aimed at 2% EL charged by India for the provision of e-commerce services. On March 26, it also ruled out similar measures against the UK, Austria, Italy, Spain and Turkey.
The statement said that the USTR is in the process of conducting a public consultation process and commenting on potential trade measures to maintain compliance before the expiration of the one-year legal deadline.
In January, the USTR found that the taxes adopted by Austria, India, Italy, Spain, Turkey, and the UK would be prosecuted under Article 301 because they discriminated against US digital companies, violated international tax policies, and heavy US companies.
At the request of the US for bilateral talks on the issue, India submitted its views to the USTR in July and November. “It was also clarified that EL was only used before the importation because it relied on sales taking place in India through digital means,” the official quoted above said.
The 2% fixed EL applies to e-commerce owners who are residents who do not have a permanent residence in India. The limit for this amount is ₹ 2 crore, which is balanced and equally applicable to all e-commerce operators around the world with businesses in India, he said.
“This tax does not discriminate against any US company as it applies equally to all people who do not live in commerce, regardless of their nationality.”
The Equalization Levy recognizes the principle that in the digital world, a retailer can engage in business transactions without realizing it, and governments have the legal right to charge those services, the official said.
The Department of Trade said that there is no refund as this visa was canceled before the first day of April 2020 which is the date on which the levies begin to be paid. It does not have any external applications as it only works on revenue from India. In addition, EL was one of the measures proposed by the OECD / G20 Report on Action 1 for the 2015 BEPS Project aimed at addressing the tax challenges posed by digital economic integration.
The statement was issued in response to a USTR response to a section 301 investigation into India’s EL’s.