Equalization Levy: India, US extend digital tax on e-commerce deliveries till June 30

India and the US have decided to extend the 2 percent equalization tax or digital tax on e-commerce deliveries until June 30, the Ministry of Finance said on Friday. In a major reform of the international tax system, India and the US joined 134 other members of the OECD/G20 Inclusive Framework (including Austria, France, Italy, Spain and the UK) in reaching an agreement on October 8, 2021 on the two-pillar solution statement to solve tax challenges arising from the digitization 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 applicable during the Pillar I implementation period.

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

This agreement was valid from 1 April 2022 until the date of implementation of Pillar 1 or 31 March 2024, whichever comes 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 a view to holding 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 the light of the above developments, India and the US have decided to extend the validity of the agreement reflected in the November 24 declarations to June 30, 2024. All other conditions of the transitional 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 the commitments and make efforts to resolve all issues in this regard through constructive dialogue, it added.