India and US extend transitional approach on digital tax on e-com supplies

To maintain stability in digital business, India and the United States recently decided to extend the 2 percent equalization levy, or digital tax, on e-commerce supplies until June 30 this year, the former’s finance ministry said. The validity period previously expired on March 31.

On October 8, 2021, both countries joined 134 other members of the OECD/G20 Sensitivity Framework in reaching agreement on a declaration of a two-pillar solution to address the tax challenges arising from the digitalization of the economy.

In order to maintain stability in digital business, India and the United States recently decided to extend the 2 per cent digital tax on e-commerce deliveries till June 30 this year, the former’s finance ministry said. The validity was earlier set to end on March 31. All other terms of the transitional approach remain the same, the Indian finance ministry said in a statement.

On 21 October of the same year, the United States, Austria, France, Italy, Spain and the United Kingdom reached a political compromise on a transitional approach to unilateral measures applicable during the Pillar 1 implementation period. The compromise was reflected in a joint statement issued by the six countries.

On November 24, 2021, India and the United States agreed that the same terms and conditions as those under the October 21 Joint Statement shall apply between them with respect to the 2% surtax levied by India on the supply of e-commerce services and the trade activities of the United States related to the said surtax.

This agreement was valid from April 1, 2022 until the date of implementation of Pillar I or March 31, 2024, whichever came first.

On December 18, 2023, the Inclusive Framework issued a statement calling for the text of the Pillar I Multilateral Convention to be finalized by the end of March 2024, with the signing ceremony scheduled for the end of June 2024.

On February 15, 2024, the United States and Austria, France, Italy, Spain, and the United Kingdom decided to extend the political compromise set out in the October 21 Joint Statement until June 30, 2024.

India and the United States have therefore decided to extend the validity of the agreement mentioned in the November 24 statements till June 30 this year. All other terms of the interim approach remain the same, as stated in the Ministry of Finance statement.

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