HomeIndiaU.S. Dropping Punitive Tariff on Indian Exports after Deal on DST

U.S. Dropping Punitive Tariff on Indian Exports after Deal on DST

U.S. Dropping Punitive Tariff on Indian Exports after Deal on DST

Union Commerce and Industry Minister Piyush Goyal and United States Trade Representative Katherine Tai at the 12th India-USA Trade Policy Forum, in New Delhi on Nov. 23. (ANI photo)


NEW YORK (IANS) – The U.S. is dropping the proposed 25 percent additional duties on more than 25 Indian exports ranging from shrimp and basmati rice to gold jewelry and furniture following a settlement of the dispute over the Digital Services Tax imposed by New Delhi on some giant American companies, according to the US Trade Representative’s Office.

The announcement on Nov. 24 came after the visit of USTR Katherine Tai to India this week.

The U.S. Treasury Department said that an agreement to settle the dispute was reached with India on the basis of the international agreement on taxing multinationals that was reached in July and finalized last month by 137 countries, paving the way for the USTR to drop the additional import duties.

“Overall political agreement is yet further demonstration of our commitment to working together to reach consensus, and to deliver far-reaching multilateral reforms that help support our national economies and public finances,” the department said.

The punitive tariffs on some Indian exports that were imposed in June were temporarily suspended for 180 days and were to have come into force on Tuesday but are now withdrawn, the USTR Office said citing the Treasury Department announcement.

The additional import duties were to have been in retaliation for India imposing a two percent DST starting in April last year on earnings in the country by foreign technology and e-commerce companies like Amazon, Facebook and Google.

The settlement was based on the Organization for Economic Cooperation agreement on international taxation which has at its core a global minimum corporate tax of 15 percent and makes way for countries to tax multinational enterprises, especially tech giants like Google, Facebook and Amazon, on their earnings there.

This would mutually benefit the U..S and other countries because while recognizing the right of all countries to tax the multinationals, it also sets the minimum tax of 15 per cent to disincentivize companies from locating in countries with little or no taxes on them to evade paying taxes in what are really their home countries.

Former Republican President Donald Trump’s administration in its last days in January declared the DST discriminatory making it liable for counteraction and his Democratic Party successor Joe Biden’s officials continued the opposition culminating in the imposing of the punitive tariffs.

The U.S. held that the DST was discriminatory because it did not apply to Indian technology and e-commerce companies.

The U.S. also threatened similar retaliatory tariffs against Austria, Britain, France, Italy, Spain and Turkey for the DST they imposed on U.S. companies.

Those countries have since reached agreements with the U.S. for dropping the DST and Washington in turn cancelling the additional tariffs on their exports.

The USTR said that the DST on e-commerce services of U.S. companies that accrue in India starting on April 1 next year will be creditable to future taxes under the OECD agreement starting on March 31, 2024, or when the agreement is implemented, whichever is earlier.

The Treasury Department called the deal between India and the U.S. “a pragmatic solution” and said the two countries are “committed to working together through constructive dialogue on this matter.”

Meanwhile, on another trade issue, the U.S. has said that it could consider restoring the tariff concessions to India under the General Scheme of Preferences that was withdrawn by Trump in 2019 as he launched initiatives to cut U.S. trade deficits.

A joint statement issued on Nov. 24 after the Twelfth Ministerial meeting of the Trade Policy Forum in New Delhi led by Tai and Commerce Minister Piyush Goyal said, “India highlighted its interest in restoration of its beneficiary status under the U.S. Generalized System of Preferences program; the United States noted that this could be considered, as warranted, in relation to the eligibility criteria determined by the U.S. Congress.”

The GSP program which gave Indian exports trade concessions worth $5.6 billion was limited to certain categories like apparel and footwear with the aim of alleviating poverty by promoting exports by poor craftspeople and artisans in those sectors.

Ending the GSP, Trump said that he had “determined that India has not assured the United States that India will provide equitable and reasonable access to its markets.”

He had brought up as examples India’s duty on American whiskey, which he said was 150 percent, and on Harley Davidson motorcycles that he asserted he had gotten reduced from 100 per cent to 50 percent.

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