India, US extend digital tax on e-commerce supplies till June 30

NEW DELHI: India and the United States Friday announced extension of a 2% equalisation levy for digital tax on e-commerce supplies until June 30, the finance ministry said in a statement.

The move brings clarity to American digital companies operating in India, who will now be required to furnish tax for this period.

Officials said while this would take care of the taxation issue for the first quarter, a final guideline for the second quarter onwards will be given in the upcoming budget in July.

Both the countries had reached a deal in November, 2021 that allowed New Delhi to impose the 2% levy until March 31, 2024, or till the implementation of Pillar 1 of the OECD agreement on taxing multinationals and cross-border digital transactions.

New Delhi and the US along with 134 other members of the OECD/G20 Inclusive Framework (including Austria, France, Italy, Spain, and the UK) had inked an agreement in October, 2021, on the statement on a two-pillar solution.

On December 18, 2023, a statement called for a finalisation of the text of the Pillar 1 multilateral convention by the end of March 2024 with a view to holding a signing ceremony by the end of June 2024. But consensus is yet to be reached on the agreement.

India levied equalisation levy or what has been popularly termed as google tax at the rate of 6% in 2016, The government introduced a 2% equalisation levy on all overseas e-commerce transactions originating in India from April 1, 2020.

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

India and the US will remain in close contact to ensure that there is common understanding of the respective commitment and endeavour to resolve all issues on this matter through constructive dialogue, it added.