{"id":76004,"date":"2021-01-09T10:56:27","date_gmt":"2021-01-09T05:26:27","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=76004"},"modified":"2021-01-11T12:34:52","modified_gmt":"2021-01-11T07:04:52","slug":"ustr-slams-indias-equalisation-levy","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/ustr-slams-indias-equalisation-levy\/","title":{"rendered":"USTR slams India\u2019s Equalisation levy"},"content":{"rendered":"<p><b><span data-contrast=\"auto\">News:<\/span><\/b><span data-contrast=\"auto\">\u00a0US Trade Representative (USTR) has released the findings of the Section 301 report.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\"><strong>Source:<\/strong>\u00a0<\/span><a href=\"https:\/\/epaper.thehindu.com\/Home\/MShareArticle?OrgId=G6O859S9E.1&amp;imageview=0\"><span data-contrast=\"none\">The Hindu<\/span><\/a><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The report has said that India\u2019s 2%\u00a0equalisation\u00a0levy is unreasonable or discriminatory potentially attracting withdrawal of US trade concessions or duties on Indian exports.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u00a0<\/span><b><span data-contrast=\"auto\">What is\u00a0<\/span><\/b><b><span data-contrast=\"auto\">Equalisation<\/span><\/b><b><span data-contrast=\"auto\">\u00a0Levy?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"%1.\" data-font=\"Cambria\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">When was 2%\u00a0Equalisation\u00a0Levy introduced?<\/span><\/b><span data-contrast=\"auto\">\u00a0In the Finance Bill 2020-21 a 2% digital service tax (DST) was imposed on non-resident e-commerce operator in India.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"%1.\" data-font=\"Cambria\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Eligibility:<\/span><\/b><span data-contrast=\"auto\">\u00a0Companies with a turnover of over Rs. 2 crore, will pay this levy on the consideration received for online sales of goods and services.\u00a0\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"%1.\" data-font=\"Cambria\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"3\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Purpose:\u00a0<\/span><\/b><span data-contrast=\"auto\">The purpose of the levy is to ensure fair competition, reasonableness and exercise the ability of governments to tax businesses that have a close nexus with the Indian market through their digital operations<\/span><\/li>\n<\/ul>\n<p><b><span data-contrast=\"auto\">Why USTR is concerned?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\u00b7\" data-font=\"Symbol\" data-listid=\"2\" aria-setsize=\"-1\" data-aria-posinset=\"23\" data-aria-level=\"1\"><span data-contrast=\"auto\">USTR is mainly concerned as 72% companies that will face the levy are American.\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\u00b7\" data-font=\"Symbol\" data-listid=\"2\" aria-setsize=\"-1\" data-aria-posinset=\"24\" data-aria-level=\"1\"><span data-contrast=\"auto\">Aggregate tax bill for US companies will exceed US $ 30 Million.\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><b><span data-contrast=\"auto\">What does the Special 301 Report say on Equalization levy?\u00a0<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The USTR report has said that the\u00a0Equalisation\u00a0Levy is a violation of international tax principles:<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ol>\n<li><b><span data-contrast=\"auto\">Firstly<\/span><\/b><span data-contrast=\"auto\">, it is discriminatory as the law explicitly exempts Indian companies while targeting non-Indian firms.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"auto\">Secondly, levy<\/span><\/b><span data-contrast=\"auto\">\u00a0is contravening the international tax principle that companies absent a territorial connection to a country should not be subject to that country\u2019s corporate tax regime.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"auto\">The third\u00a0<\/span><\/b><span data-contrast=\"auto\">issue is of taxing revenue instead of income. This is inconsistent with the international tax principle that income\u2014not revenue\u2014is the appropriate basis for corporate taxation.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"auto\">Fourth, levy is discriminating against US companies.\u00a0<\/span><\/b><span data-contrast=\"auto\">As shown above, majority of the affected companies will be American.<\/span><\/li>\n<\/ol>\n<p><b><span data-contrast=\"auto\">What are the justifications by the Indian Government?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ol>\n<li><span data-contrast=\"auto\">India has said that\u00a0<\/span><b><span data-contrast=\"auto\">levy does not discriminate against US companies<\/span><\/b><span data-contrast=\"auto\">\u00a0as it applies equally to all non-resident e-commerce operators irrespective of their country of residence.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"auto\">The levy\u00a0<\/span><b><span data-contrast=\"auto\">does not have extraterritorial application<\/span><\/b><span data-contrast=\"auto\">\u00a0as it applies only on the income generated from India.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"auto\">Government is in its rights to tax digital transactions\u00a0<\/span><\/b><span data-contrast=\"auto\">as the levy is recognition of the principle that in a digital world, a seller can engage in business transactions without any physical presence.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"auto\">In addition,\u00a0<\/span><span data-contrast=\"auto\">Equalisation<\/span><span data-contrast=\"auto\">\u00a0levy was one of the methods suggested by the 2015 OECD\/G20 Report on Action 1 of BEPS Project which was aimed at tackling the taxation challenges arising out of digitization of the economy.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"auto\">Equalisation<\/span><span data-contrast=\"auto\">\u00a0levy is a way to tax foreign digital companies and seen as a temporary alternative to the\u00a0<\/span><b><span data-contrast=\"auto\">GAFA\u00a0<\/span><\/b><span data-contrast=\"auto\">(Google, Apple, Facebook and Amazon)\u00a0<\/span><b><span data-contrast=\"auto\">tax\u00a0<\/span><\/b><span data-contrast=\"auto\">until such measure is well defined in India.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<\/ol>\n<table>\n<tbody>\n<tr>\n<td><b><span data-contrast=\"auto\">Additional Facts:<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ol>\n<li><b><span data-contrast=\"auto\">Special 301 Report:\u00a0<\/span><\/b><span data-contrast=\"auto\">It is prepared annually by the Office of the United States Trade Representative (USTR) that identifies trade barriers to United States companies and products due to the intellectual property laws, such as copyright, patents and trademarks in other countries.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"auto\">GAFA Tax:\u00a0<\/span><\/b><span data-contrast=\"auto\">It is a proposed digital tax named after digital giants Google, Apple, Facebook and Amazon. GAFA tax is levied on large technology companies and Internet companies. Recently France has decided to introduce 3% of GAFA tax on revenues from digital activities within their territory.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ol>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>News:\u00a0US Trade Representative (USTR) has released the findings of the Section 301 report.\u00a0\u00a0 Source:\u00a0The Hindu\u00a0 The report has said that India\u2019s 2%\u00a0equalisation\u00a0levy is unreasonable or discriminatory potentially attracting withdrawal of US trade concessions or duties on Indian exports.\u00a0 \u00a0What is\u00a0Equalisation\u00a0Levy?\u00a0 When was 2%\u00a0Equalisation\u00a0Levy introduced?\u00a0In the Finance Bill 2020-21 a 2% digital service tax (DST) was&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/ustr-slams-indias-equalisation-levy\/\">Continue reading <span class=\"screen-reader-text\">USTR slams India\u2019s Equalisation levy<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":76007,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,1351,1310,9],"tags":[1354],"class_list":["post-76004","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-9-pm-daily-articles","category-daily-news","category-daily-news-updates","category-public","tag-eco_3","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2021\/01\/USTR-slams-Indias-Equalization-levy.jpg?fit=1280%2C720&ssl=1","views":{"total":0,"cached_at":"","cached_date":1700419008},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/76004","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=76004"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/76004\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/76007"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=76004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=76004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=76004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}