India, USA agree on transitional approach for digital tax on e-commerce supplies

In the main reform of the International Tax System, on October 8 this year, India and the United States joined 134 other members of the OECD / G20 inclusive framework in reaching an agreement on the statement on the solution of two pillars to overcome the tax challenges arising from economic digitization tax challenges .

After that on October 21, the United States, Austria, France, Italy, Spain and England reached an agreement on the transition approach to existing unilateral steps when applying a pillar.

“India and the United States have agreed to the same … must be applied between the United States and India in connection with India’s accusations of 2 percent distribution equity at the supply of e-commerce services and the United States trade action regarding the distribution of equity.

“However, the temporary period will apply will start from April 1, 2022, until the implementation of the pillar one or 31 March 2024, which was previously,” the Ministry of Finance said in a statement.

India and the US will remain close to ensure that there is a general understanding of their commitment and efforts to resolve further income differences on this issue through constructive dialogue, he added.

The final provisions of the agreement must be completed on February 1, 2022, adding ministries.

The Chairman of Nangia Andersen India Rakesh Nangia said as far as the increased tax to India in connection with equal retribution from 1, 2022, until March 31, 2024, or when the pillar one came into force, exceeding the equivalent amount to the maturity tax under the first pillar in the first year of implementation (Expanded to achieve proportionality with a temporary period), the advantages will be credited to the part of the income tax liability related to the number of A as these countries respectively.

This is a commendable step from the Indian government. This agreement must ensure that the company will pay a fair tax starting from 2022, regardless of the actual implementation of pillars of one, Nangia added, reported the PTI news agency.

Global Tax Partner AKM Amit Maheshwari said the Indian-US agreement on the transition approach to India, because it could continue with 2 percent retribution today with certainty to pillars, along with the commitment of the US side to end the proposed trade action and not to impose more actions continued too.

“Furthermore, this will help prevent tax losses that arise because online transactions such as India have to roll back EL 2.0 in any way after Pillar 1 and it must be remembered that the Pillar 1 only applies to companies with a global turnover above 20 billion Euros, which Exactly the top 100 companies, “Maheshwari said.