NEW DELHI: The US on Tuesday initiated investigation into digital services taxes (DST) that have been either adopted or are being considered by 10 of its trading partners including India that could invite punitive tariff sanctions. The move could heighten trade tensions between the US and India which has delayed signing of a limited trade package between the two.
The other countries being investigated are Austria, Brazil, the Czech Republic, the European Union, Indonesia, Italy, Spain, Turkey, and the United Kingdom.
The probe will be conducted by the United States Trade Representative (USTR) under the Section 301 of Trade Act that empowers authorities to respond to a foreign country’s action, considered unfair or discriminatory and negatively affects US trade.
"President (Donald) Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies," said USTR Robert Lighthizer in a statement. "We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination."
USTR in a statement said India in March adopted a 2% DST. “The tax only applies to non-resident companies, and covers online sales of goods and services to, or aimed at, persons in India. The tax applies only to companies with annual revenues in excess of approximately Rs. 20 million (approximately US$ $267,000). The tax went into effect on April 1, 2020," it added.
The US has reportedly opposed efforts to tax revenues from online sales and advertising, saying they single out tech giants like Google, Apple, Facebook, Amazon and Netflix.