India joins OECD/G20 Inclusive Framework tax deal to address challenges arising from digitalisation

A majority of the members of OECD-G20 Inclusive Framework on Base Erosion and Profit Shifting, including India, adopted a high-level statement containing an outline of a consensus solution to address the tax challenges arising from the digitalisation of the economy.

The proposed solution consists of two components -- Pillar One, which's about re-allocation of an additional share of profit to the market jurisdictions, and Pillar Two, which consists of minimum tax and subject to tax rules.

Some significant issues, including share of profit allocation and scope of subject to tax rules, remain open and are yet to be addressed.

Further, the technical details of the proposal will be worked out in the coming months, and a consensus agreement is expected by October.

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"The principles underlying the solution vindicates India's stand for a greater share of profits for the markets, consideration of demand-side factors in profit allocation, the need to seriously address the issue of cross border profit shifting and need for subject to tax rule to stop treaty shopping," the finance ministry statement said.

India is in the favour of a consensus solution that is simple to implement and simple to comply with.

The ministry said the solution should result in the allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies.

The ministry said India will strive to "reach a consensus on ready to implement the solution with Pillar one and Pillar two as a package by October and contribute positively for the advancement of the international tax agenda".

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