Ani
Has been updated: June 29, 2024 10:26 IST
New Delhi [India]June 29 (ANI): India and the United States have agreed to extend the 2 per cent equalisation tax, or digital tax, on e-commerce supplies till June 30.
On 8 October 2021, the two countries joined 134 other countries of the OECD/G20 Inclusive Framework (including Austria, France, Italy, Spain and the UK) in agreeing to the OECD/G20 Statement on a Two-Pillar Solution to Address Tax Challenges Arising from the Digitalization of the Economy.
On November 24, 2021, India and the United States agreed that with respect to India's levy of 2% equalization tax on the supply of e-commerce services and US trade measures with respect to such equalization tax, the same terms applicable in the Joint Statement of October 21 will apply between India and the United States.
The validity period of this agreement is from April 1, 2022 until the implementation of Pillar 1 or March 31, 2024, whichever comes first. This was stated in an official statement released by both sides in a November 24 statement.
On February 15, 2024, the United States, Austria, France, Italy, Spain and the United Kingdom decided to extend the political compromise outlined in their October 21 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 statement up to June 30, 2024. All other terms and conditions of the transition approach will remain the same,” the finance ministry release said.
The OECD/G20 two-pillar solution aims to address the tax challenges arising from the digitalization of the economy and modernize the international tax framework.
This pillar introduces a global minimum corporate tax rate to combat base erosion and profit shifting (BEPS). A minimum tax rate ensures that multinational companies pay a minimum amount of tax, regardless of where they are headquartered or do business.
It also mandates the implementation of Global Base Erosion Prevention (GloBE) rules to ensure that foreign income is taxed, in order to restore a level playing field and eliminate the need for countries to offer very low tax rates to attract investment.
The finance ministry further added in a statement that the two countries will remain in close contact to reach a common understanding on their respective commitments and will endeavour to resolve all issues on this issue through constructive dialogue. (ANI)
