This Tax Alert
discusses the recent Press Release dated 24 November 2021 issued by Government
of India on the compromise reached between India and the United States of
America (US) on a transitional approach to the treatment of existing e-commerce
Equalisation Levy (EL) during the interim period before new Pillar One rules
come into effect.
As per the Press Release, India and the US have agreed that the same terms that apply under the joint statement released by the US with five European countries on 21 October 2021 shall apply between the US and India with respect to India’s charge of 2% EL.
Considering the Press Release and 21 October joint statement, impact on India’s 2% EL could be as follows:
- India will not be required to
withdraw 2% EL until Pillar One takes effect. However, India will allow a
credit of the portion of 2% EL chargeable on non-resident (NR) e-commerce
operator (NR EOP) belonging to a multinational enterprise (MNE) during
“interim period” against that MNE’s future “Pillar One Amount A” tax
liability, when Pillar One rules are in effect. As per the Press Release,
interim period will begin from 1 April 2022 till the implementation of
Pillar One or 31 March 2024, whichever is earlier.
- The US will terminate its
proposed trade actions against India regarding the 2% EL.
- India and the US will remain in
close contact to ensure that there is a common understanding of the
respective commitments and endeavor to resolve any further differences of
views on this matter through constructive dialogue.
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