Retaliatory tariffs: India’s 2% digital tax on US-based Internet companies may cost Indian exports to the US

The United States has come up with a plan to impose retaliatory tariffs not just on India but five other countries namely Austria, Italy, Spain, Turkey, and the United Kingdom. According to a report by Bloomberg, the tariff could total almost USD 1 billion annually.

So, the retaliatory tariffs can be as high as 25 per cent, as per the documents published by the U.S. Trade Representative (USTR). The US decided to come up with taxation policies only against those countries that are levying tax on US-based technology companies like Amazon and Facebook operating internationally.

But the taxation will be more or less as much as these countries are imposing on US-based companies, stated Bloomberg. The cumulative annual value of the duties comes to $880 million, according to Bloomberg News calculations.

This decision by USTR comes at a time when efforts to replace each individual country's digital taxes with one global standard has been undertaken by the Organization for Economic Cooperation and Development (OECD). However, the deal has not reached a consensus now.

While the discussions are on, the US is keeping other options such as tariffs on.

The USTR considers this move as pushing back on the discriminatory trade barriers that are imposed. However, before passing an order on the tariff, the USTR has called for public comments and will hold public hearings from May. The public hearing for India is set for May 10.

Indian goods that will be affected by the US taxation will be shrimp, blinds, bamboo products, gold jewellery and rattan furniture. It estimated that the value of the digital services taxes (DST) payable by US companies to India will be up to about $55 million annually.

India is imposing GST on revenue of non-resident companies generated from a broad range of digital services offered in the country, including digital-platform services, digital-content sales, digital sales of a company's own goods, data-related services and software-as-a-service.

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