By Arul Louis New York, Nov 27, : The US has dropped the proposed 25 percent additional duties on more Indian exports, including shrimps, basmati rice, gold jewellery, and furniture, following a settlement over the Digital Services Tax (DST), imposed by New Delhi on certain giant American companies.According to the US Trade Representative’s Office (USTR),
The announcement was made Wednesday after USTR Katherine Tai visited India this week.
The US Treasury Department announced Wednesday that it had reached an agreement with India to settle the dispute.This was based on the international agreement on taxing multinationals, reached in July.
It was finalised last month and signed by 137 countries.This will allow the USTR to eliminate the additional import duties.
The department stated that “overall political agreement is yet another demonstration of our commitment towards working together to achieve consensus, and deliver far-reaching multilateral Reforms that help support the national economies, public finances, and societies,”
The punitive tariffs imposed on some Indian exports in June were temporarily suspended for 180 day and were supposed to have come into effect on Tuesday.However, the USTR Office stated that they are now withdrawn citing the Treasury Department announcement.
The import duties were added in retaliation to India’s April 2011 imposition of a 2 percent duty and tax on foreign technology and ecommerce companies such as Amazon, Facebook, and Google.
The Organisation for Economic Cooperation international taxation agreement was the basis of the settlement.
It has a global minimum corporate income tax of 15% and allows countries to tax multinational companies (MNEs), particularly tech giants like Amazon, Google, Facebook, and Amazon on their earnings.
This would be mutually beneficial to the US and other countries, as it recognizes the right of all countries tax multinationals.
However, it also sets the minimum rate of 15% to discourage companies from locating abroad that have low or no taxes to avoid paying taxes in their home countries.
In January 2017, the former Republican President Donald Trump’s administration declared DST discriminatory, making it liable to counteraction.
Joe Biden, his Democratic Party successor, continued the opposition that culminated in the imposition of punitive tariffs.
The US ruled that DST was discriminatory as it did not apply in India to e-commerce and Indian technology.
The US threatened similar tariffs against Austria and Britain for DST they imposed upon US companies.
These countries have since reached an agreement with the US to drop the DST and Washington, in turn cancelling any additional tariffs on exports.
According to the USTR, the DST on ecommerce services accrued in India by US companies starting April 1st next year will be creditable for future taxes under the OECD Agreement starting on March 31, 2024 or when the agreement is implemented.
The Treasury Department called the agreement between India and the US “a pragmatic resolution” and stated that the two countries were “committed to working together through constructive dialog on this matter.”
In the meantime, the US is considering restoring tariff concessions to India under its General Scheme of Preferences.This was in response to Trump’s 2019 initiatives to reduce US trade deficits.
Following the Twelfth Ministerial Meeting of the Trade Policy Forum in New Delhi, Piyush Goyal, Commerce Minister, and Tai, a joint statement was issued Wednesday.It stated that India had expressed its interest in restoring its beneficiary status under US Generalised System of Preferences program.
The United States acknowledged that this could be considered, if warranted, relative to the eligibility criteria set by the U.S.Congress.”
GSP, which granted India export concessions in trade worth $5.6 billion, was restricted to apparel and footwear.This was done to alleviate poverty by encouraging exports by artisans and poor craftspeople in these sectors.
Trump stated that he had “determined” that India had not assured the United States of an equitable and reasonable access for its markets.
He cited as examples India’s duty for American whiskey (150%) and Harley Davidson motorcycles (50%) that he claimed he had reduced from 100 to 50%.
(Arul Louis can reached at [email protected] or followed @arulouis
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