India's decision to impose 'equalisation levy' on foreign online advertising platforms has caught the US attention, with the country cautioning India against such a move. Notably, from April 1, all foreign billings for digital services provided in the country will attract a 2 per cent tax. In foreign billings, companies receive payment abroad for services provided to customers in India.
The US Trade Department's report on trade barriers flags several issues with India's digital trade policy, asking it to "strongly" reconsider, The Economic Times reported. These concerns are -- India's data localisation plan, issues with cross-border data flow, norms around intellectual property rights and India favouring local digital products.
Widening the scope, the government has also brought non-resident e-commerce companies -- or those who own, operate a digital or electronic platform for the online sale of goods or services -- under the ambit as well. Online companies including Google, Amazon and Facebook want the tax to be deferred by at least six months.
As per Reuters, Google is particularly concerned that it will not be able to swiftly identify countries where advertising arrangements were in place to target Indian users, increasing technological and compliance requirements. The US Department has said the current change in taxation around digital companies exhibited India's shift from the globally accepted norm of developing a multilateral approach to avoid double taxation.
India and the US have been holding talks to enter into a trade deal but there have been differences. Trump administration has been critical of trade deficit with India, which stood at over $14 billion till January 2020. The trade deficit stood at $16.8 billion and $21.2 billion in 2018-19 and 2017-18, respectively.