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Wipro 404.20↓-0.75(-0.19%)

Digital tax for US companies to stay until OECD pact comes into force

US to withdraw threat of retaliatory trade action

Indivjal Dhasmana New Delhi

Premium

Illustration: Binay Sinha

4 min read Last Updated : Nov 25 2021 | 11:38 AM IST

The 2 per cent equalisation levy imposed by India on digital players will continue for US companies until a global agreement on taxing multinational enterprises (MNEs) comes into effect or March 31, 2024, whichever is earlier. The United States, on the other hand, has committed to withdrawing its threat of retaliatory trade action against India, according to an agreement reached between the two countries on Wednesday.

New Delhi and Washington have agreed to count the benefits of a global agreement on taxation from the next financial year. However, the benefits would actually accrue once the global pact comes into effect or March 31, 2024, whichever is earlier, in the form of credit, according to the reading of the pact by experts.

According to the bilateral agreement, India’s equalisation levy will not go away in the interim period, which starts from April 1, 2022. However, once the global agreement (Pillar-1) comes into effect, it would