US probes six countries, including India about DST

The United States is going into the next round of digital services tax (DST) investigations against Austria, India, Italy, Spain, Turkey and the United Kingdom.

The US Trade Representative (USTR), in January, found that the DSTs adopted by the stated countries were subject to action under Section 301 of the US Trade Act because they discriminated against the US digital companies, were inconsistent with principles of international taxation and burdened the US companies.

On Friday, the USTR said it is proceeding with the public notice and comment process on possible trade actions to preserve procedural options before the conclusion of the statutory one-year time period for completing the investigations. “The United States is committed to working with its trading partners to resolve its concerns with digital services taxes, and to address broader issues of international taxation,” said US Trade Representative Katherine Tai. “The US remains committed to reaching an international consensus through the OECD process on international tax issues. However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs.”

It highlighted that the remaining four jurisdictions – Brazil, the Czech Republic, the European Union and Indonesia – have not adopted or not implemented the DSTs under consideration when the investigations were initiated. As such, the USTR is terminating these four investigations without further proceedings. “If any of these jurisdictions proceed to adopt or implement a DST, the USTR may initiate new investigations,” the US warned.

The Trump administration, on June 2 2020, had initiated investigations into DSTs adopted or under consideration in 10 jurisdictions – Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom.

Following comprehensive investigations, including consultations with the countries subject to investigation and consideration of public comments, the USTR in January 2021 issued reports on DSTs adopted by Austria, India, Italy, Spain, Turkey and the UK. India had adopted the operative form of its DST on March 27, 2020.

The DST imposes a 2% tax on revenue generated from a broad range of digital services offered in India, including digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service, and several other categories of digital services.

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The US move came a day after the US and India agreed to work constructively to resolve key outstanding bilateral trade issues and to take a comprehensive look at ways to expand the trade relationship. Tai highlighted the important trade and investment relationship between the two countries during her maiden phone call with her Indian counterpart Commerce and Industry Minister Piyush Goyal.