‘Google tax’ could draw reprisal, US cautions India

New Delhi: India’s 6% equalisation levy on foreign online advertising platforms may impede its overseas trade and increase the risk of retaliation from countries where Indian companies are doing business, the US has cautioned. This is because its provisions do not provide credit for tax paid in other countries for the service provided in India, it said.In its latest report on trade barriers, the US also marked a slew of issues in India’s digital trade including those proposed in the draft ecommerce policy, such as data localisation requirements, restrictions on cross-border data flows, expanded grounds for forced transfer of intellectual property and proprietary source code, and preferential treatment for domestic digital products. Washington said it “strongly encourages India to reconsider this draft policy”.On the equalisation levy, or the so-called ‘Google tax’, it said the current structure of the tax represented a shift from internationally accepted principles, which provided that digital taxation mechanisms should be developed on a multilateral basis to prevent double taxation.Tariff Too High’The equalisation levy was first imposed in 2016 to tax companies such as Google, Facebook and Netflix on their online advertising. This year, India expanded its scope to all overseas ecommerce transactions originating from India.On the issue of India’s foreign direct investment (FDI) rules in ecommerce, the US said the only exceptions for FDI in inventory based ecommerce were for food product retailing and singlebrand retailers that met certain conditions. This “narrow exception limits the ability of many electronic commerce service suppliers to serve the Indian market”, it said.India permits 100% FDI in business-to-business or market place based ecommerce, but prohibits foreign investment in business-to consumer or inventory-based online trade.New Delhi and Washington have been negotiating a trade deal for more than a year with ministers and officials of both countries discussing the issues at various domestic and global fora.In the April-January period of 2019-20, India’s exports to the US were $44.7 billion, while imports were $30.5 billion. In the previous fiscal year ended March 2019, India’s trade surplus with the US had reduced to $16.8 billion from $21.2 billion in 2017-18.MAKE IN INDIA, GOODS TRADEThe US said it had actively sought bilateral and multilateral opportunities to increase access to India’s market, but American exporters continued to encounter significant tariff and non-tariff barriers that impeded imports of US products into India, especially dairy, poultry and highly specialised equipment.It said India imposed “onerous requirements” on dairy imports and insisted that they be derived from animals that had never consumed any feeds containing internal organs, blood meal, or tissues of ruminant origin, based on religious and cultural grounds.To address these concerns, Washington, in 2015 and 2018, proposed labelling the products with details of their origin so that the consumer could make a choice, but India rejected it, as per the report.The US said it continued to press India to provide access to the dairy market and is also monitoring market access issues related to poultry, such as “unnecessary” testing requirements.

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