The US Department of the Treasury announced the extension of its agreement with India on 28 June, 2024, regarding the transition from the existing equalisation levy to a new multilateral solution agreed by the OECD-G20 Inclusive Framework.
The agreement has been extended to Sunday, 7 July 2024.
Currently, India’s equalisation levy is 2% equalisation on e-commerce to the new multilateral framework under Pillar One of the OECD’s two-pillar solution for international tax reforms.
The agreements stipulate that any Digital Services Tax (DST) or equalisation levy that US companies incur during an interim period will be creditable against future income taxes under Pillar One. In exchange, the US has lifted the additional tariffs on imports that were imposed and later suspended following Section 301 investigations into the DSTs, including India’s equalisation levy.
The extension of the US-India agreement aligns it with the expiration of similar agreements with six other countries that had implemented digital services taxes, such as the UK, Austria, France, Spain, Italy, and Turkey.
Following an October 2021 two-pillar tax agreement with nearly 140 countries, these nations paused their digital services taxes. The deal introduces a 15% global minimum corporate income tax. It also reallocates some taxing rights on large multinationals to the countries where they sell goods and services, and replaces the digital services taxes.
On 8 October, 2021, a historic agreement was reached between over 130 countries of the G20/OECD Inclusive Framework on a two Pillar package of reforms to the international tax framework.
In support of that agreement, in a joint statement on 24 November 2021, the US and India announced the terms of a political compromise on the transition from India’s existing equalisation levy to the new multilateral solution and continuing discussions on this matter through constructive dialogue. This agreement remained in effect until 30 June, 2024.