US labels India's digital service tax discriminatory, says targets American firms mostly 

The US Trade Representative's office pointed out that out of 119 companies likely subjected to the tax imposed by India, 86 companies were US-based ones.
Image used for representational purpose only
Image used for representational purpose only

NEW DELHI: The US Trade Representative's office has slammed India's digital services tax which it said discriminates against US companies like Amazon, Google and Facebook.

The USTR's findings released on Wednesday were based on its 'Section 301' probe into the digital taxes levied by a number of countries, and potentially could result in retaliatory tariffs.

Underlining the 'discrimination', the report pointed out that of the firms subjected to India's equalisation levy of 2 per cent, 72 per cent are US companies.

"Our investigation indicates that India's DST discriminates against US digital services companies," the USTR said, adding the laws exempt Indian companies from the same tax.

"The result is that US 'non-resident' providers of digital services are taxed, while Indian providers of the same digital services to the same customers are not. This is discrimination in its clearest form," the report said.

The USTR pointed out that out of 119 companies likely subjected to the tax imposed by India, 86 companies were US-based ones. Of the rest, seven firms each were from China and UK, while there were six French firms and five Japanese companies which too were impacted.

The "investigation would support a finding that India's DST is actionable under Section 301", the USTR report said. Besides, India's levy, taxes companies' revenues rather than their income. This , it said was inconsistent with the global tax principle that 'income and not revenue' should be the basis for corporate taxes.

Commerce Ministry officials admitted the probe could potentially lead to tariffs before President Donald Trump leaves office or even in the early days of President-elect Joe Biden's terms, but said they could show that there was no inherent discrimination in the tax.

Their contention was that the levy was imposed on foreign firms which did not have any significant operations in India but sold here, "in order to bring them on par with Indian e-commerce firms which were subject to a number of other taxes."

"In any case this levy is only on sales in India and does not tax sales outside India," officials said.

USTR has called out taxes imposed not only by India but also France, Italy and Turkey as discriminatory.
 

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