USTR Announces, Tariffs in Section 301 on Digital Services Taxes Investigations in India

· Implementation Suspended for Six Months

· Five others in EU and UK also Targetted

In a retaliatory action by USTR in response to Fin Min’s (DoR) unilateral decision to impose equalisation levy and to some extent tariffs every now and then on products. US them to wait for the OECD process already underway. The equalisation levy payable by US companies to India will be $ 55 million per year. Even the commerce ministry is not jumping with joy.

USTR just announced decision to impose additional tariffs (25%) on 40 products from India. Estimated trade value of these is over $120 million. They will however keep it in abeyance for 6 months for the ongoing multilateral discussions at OECD to complete.

This marks the start of a trade war with the Biden Administration that was totally avoidable. It comes at a time when both sides just started talking a fresh on trade. After China it’s now US with whom India has to fight underway.

The 40 tariff sub-heads for tariffs include Rattan furniture and parts, precious stone articles, gold rope necklaces and neck chains, cultured pearls, yarn, cigarette paper, and corks and stoppers.

United States Trade Representative Katherine Tai today announced the conclusion of the one-year Section 301 investigations of Digital Service Taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom. The final determination in those investigations is to impose additional tariffs on certain goods from these countries, while suspending the tariffs for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and in the G20 process.

“The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes,” said Ambassador Katherine Tai. “The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes. Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future.”

Federal Register notices announcing and suspending the trade actions in the six investigations may be found at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes.

Background

On June 2, 2020, USTR initiated investigations into DSTs adopted or under consideration in ten jurisdictions: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.

In January 2021, following comprehensive investigations USTR determined that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies. Detailed reports on the findings in the investigations may be found at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes.

In March 2021, USTR announced proposed trade actions in these six investigations, and undertook a public notice and comment process, during which it collected hundreds of public comments and held seven public hearings. USTR also terminated the remaining four investigations (of Brazil, the Czech Republic, the European Union, and Indonesia) because those jurisdictions had not implemented the DSTs under consideration.