"India and US have agreed that the same terms that apply under the October 21 joint statement shall apply between the US and India with respect to India's charge of 2% equalisation levy on e-commerce supply of services and the US' trade action regarding the said equalisation levy," the finance ministry said in a statement. It added that India and the US will remain in 'close contact' to ensure there is a common understanding of the respective commitments, and any further differences of views on this matter are resolved through constructive dialogue.The final terms of the agreement will crystalise by February 1, 2022, the ministry added. "Under this agreement, and consistent with and applying the same terms as the earlier agreements with Austria, France, Italy, Spain, the United Kingdom, and Turkey, in defined circumstances the liability from India's equalisation levy on e-commerce supply of services that US companies accrue in India during the interim period will be creditable against future taxes accrued under Pillar 1 of the OECD agreement. "The India-USA agreement on a transitional approach is beneficial to India as it can carry on with the present 2% levy with certainty until Pillar 1 takes effect," said Amit Maheshwari, tax partner at tax and consulting firm AKM Global.Once the OECD agreement rolls out, the 2% equalisation levy will have to be withdrawn. This applies to other countries as well that have imposed a similar tax.According to the terms agreed upon by five countries in the October 21 agreement, India will have to provide credit if collected tax over this period is more that it gets when the OECD regime rolls out for a similar period.

Source: Economic Times November 25, 2021 06:12 UTC