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Big tech takes equalisation levy row to US govt

NEW DELHI: A bunch of 7 most sensible business associations representing web and technology giants similar to Google, Facebook, Amazon, Microsoft and Adobe has sought withdrawal of the new equalisation levy that comes into force from April 1, due to its standard detrimental affect on American companies.

The associations have written a joint letter to United States Trade Representative Robert E. Lighthizer looking for "swift engagement with the Government of India” to raise “strong concerns” on the new levy, which they said was a “highly discriminatory new tax on foreign companies."

Last week, the government expanded the scope of the equalisation levy – which was first imposed in 2016 -- to all in a foreign country e-commerce transactions originating from India. This was done via an amendment to the Finance Bill, passed by means of Parliament on March 23.

Apart from corporations similar to Netflix, Airbnb and, technology, web and Software as a Service (SaaS) companies ranging from Microsoft to Adobe and Google to Facebook, which provide products and services to Indians via their in a foreign country hands, are expected to be impacted by means of the new 2% levy.

“The tax was included into the Union Budget 2020 at a past due stage and with none public session or Parliamentary debate and yet is ready to apply only one week later, beginning on April 1,” in line with the letter dated March 27 which ET has reviewed.

The letter has been jointly written by means of Computing Technology Industry Association (CompTIA), Information Technology Industry Council (ITI), Internet Association (IA), US-India Strategic Partnership Forum (USISPF), United States Council for International Business (USCIB) and two different business bodies.

Separately, the Internet and Mobile Association of India (IAMAI) has asked the government to withdraw the levy saying it requires companies to switch its inside programs and billing mechanisms and would burden the business at a time when it's struggling due to the Covid-19 pandemic.

“This surprising imposing of an additional levy at such instances will handiest make matters worse,” IAMAI mentioned in a commentary on Tuesday.

The most sensible concern voiced within the letter by means of the seven US-based associations is that the levy at once discriminates against US corporations and exports while explicitly exempting Indian corporations.

It also says that the scope of the levy may be considerably broader than that of the national European digital products and services taxes (DST). The levy is acceptable to all companies with a turnover of Rs 2 crore, which is an overly low exemption threshold, the letter states.

As equalisation levy isn't part of source of revenue tax, companies may not get credit for it in their place of abode nation or beneficial treaty advantages.

This will push some companies to arrange local operations in India for compliance and would possibly move on the higher cost of operations to consumers, say mavens.

The tax, which got here as a bit of of “surprise”, has been imposed at a time when the Organisation for Economic Co-operation and Development (OECD) is still growing a consensus on taxation of digitalized businesses.

India has been negotiating terms that can be beneficial for the rustic, including that the choice of users will have to resolve taxes payable by means of digital majors in a rustic.

“The Indian tax represents the broadest framing of a unilateral tax on e-commerce corporations that we've got noticed thus far, and runs at once counter to the Indian Government’s commitment to reaching a multilateral resolution in ongoing negotiations on the OECD on the taxation challenges of digitalization to the worldwide economic system,” the letter says.

The letter has sought quick intervention of the USTR in spite of the continuing health crisis.

“Given the uniquely problematic features of the tax, the quick and standard detrimental affects on U.S. companies, the Indian Government’s failure to visit business, and its forthcoming access into force, we might a great deal recognize your near-term engagement to seek its withdrawal,” it mentioned.

Neeru Ahuja, Partner, Deloitte India mentioned that the levy would possibly face multiple implementation challenges. “There also could be prison problem from the point of view of extra-territoriality as the availability also covers non-resident to non-resident transaction which makes use of India knowledge,” Ahuja mentioned, including questions over how a non-resident gets credit for those taxes in the home nation also would stand up.

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