India, US agree for transitional approach on equalisation levy on e-commerce supplies
The Finance Ministry has said that India and the United States have agreed for a transitional approach on equalisation levy or digital tax on e-commerce supplies beginning April 1, 2021. In a major reform of the international tax system, on October 8, 2021, 136 countries, including India, have agreed to an overhaul of global tax norms to ensure that multinationals pay taxes wherever they operate and at a minimum 15% rate.
However, it said the deal requires countries to remove all digital services tax and other similar unilateral measures and to commit not to introduce such measures in the future. It noted that the proposed two-pillar solution of the global tax deal consists of two components – Pillar One, which is about reallocation of an additional share of profit to the market jurisdictions and Pillar Two, consisting of minimum tax and subject to tax rules.
It further said India and the U.S. will remain in close contact to ensure that there is a common understanding of the respective commitments and endeavour to resolve any further differences of views on this matter through constructive dialogue. The final terms of the agreement shall be finalised by February 1, 2022.