India and the United States have agreed to extend a 2% equalization charge or digital tax on e-commerce suppliers till June 30, the finance ministry announced on Friday. In a major reform of the international tax system, India and the United States joined 134 other members of the OECD/G20 Inclusive Framework (including Austria, France, Italy, Spain, and the United Kingdom) in reaching an agreement on a two-pillar solution to address the tax challenges arising from the economy's digitalisation on October 8, 2021.
On October 21, 2021, the United States, Austria, France, Italy, Spain, and the United Kingdom established a political agreement on a transitional solution to the unilateral measures in place while Pillar 1 is being implemented.
On November 24, 2021, India and the United States agreed that the same terms as in the October 2021 Joint Statement would apply to India's charge of a 2% equalization levy on e-commerce supply of services and the United States' trade action regarding the Equalisation Levy.
This agreement was active from April 1, 2022, until the introduction of Pillar 1 or March 31, 2024, whichever occurred first.
The Inclusive Framework published a statement on December 18, 2023, calling for the language of the Pillar 1 international convention to be finalized by the end of March 2024, with a signing ceremony scheduled for the end of June 2024.
On February 15, 2024, the United States, Austria, France, Italy, Spain, and the United Kingdom agreed to prolong the political compromise outlined in the October 21 Joint Statement until June 30, 2024.
"In view of the aforementioned developments, India and the United States have agreed to extend the validity of the agreement contained in the November 24 Statements until June 30, 2024. "All other terms of the transitional approach remain unchanged," the finance ministry stated in a statement.
India and the United States would maintain regular communication to ensure that there is a clear understanding of their respective commitments and will work to settle all difficulties on this topic via constructive dialogue, it added.
