India and US extend digital tax on e-commerce deliveries until June 30

India and the United States have decided to extend the 2 percent equalization tax, also known as digital tax, on e-commerce goods and services until June 30, the Ministry of Finance announced on Friday.

In a significant reform of the international tax system, India and the United States joined 134 other members of the OECD/G20 inclusive framework (including Austria, France, Italy, Spain, and the United Kingdom) in reaching an agreement on October 8, 2021, on a statement on a two-pillar solution to address the tax challenges arising from the digitalization of the economy.

On October 21, 2021, the United States and Austria, France, Italy, Spain and the United Kingdom reached a political compromise on a transitional approach to unilateral measures in force during the Pillar I implementation period.

On November 24, 2021, India and the United States agreed that the same terms and conditions that apply under the October 2021 Joint Statement with respect to India’s 2% e-commerce services levy and the U.S. trade action on the said levy will apply between India and the United States.

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

On 18 December 2023, the Inclusive Framework issued a statement calling for the finalisation of the text of the multilateral Pillar I convention by the end of March 2024, with a view to organising a signing ceremony by 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, 2024 Joint Statement until June 30, 2024.

“In light of the above developments, India and the United States have decided to extend the validity of the agreement reflected in the November 24 statements to June 30, 2024. All other terms and conditions of the interim approach remain the same,” the finance ministry said in a statement.

India and the United States will remain in close contact to ensure mutual understanding of commitments and make efforts to resolve all issues in this regard through constructive dialogue, it added.

Published: Friday, June 28, 2024, 07:15 PM IST