On India-US table: Locking in duty-free electronic transmissions

Under a WTO moratorium, countries do not levy Customs duties on cross-border e-commerce transactions such as the download of software, e-books and similar products

New Delhi has committed to negotiating bilateral digital trade rules under the India-United States interim trade agreement, including provisions to prevent the imposition of Customs duties on ecommerce electronic transmissions, according to a White House fact sheet.

 

The fact sheet, released on Tuesday (India time), also said that India would scrap its digital services tax.

 

“India will remove its digital services taxes and (has) committed to negotiate a robust set of bilateral digital trade rules that address discriminatory or burdensome practices and other barriers to digital trade, including rules that prohibit the imposition of customs duties on electronic transmissions,” it said.

 

Under a World Trade Organisation (WTO) moratorium, countries do not levy Customs duties on cross-border e-commerce transactions such as the download of software, e-books and similar products. For close to two decades, WTO member nations have extended this temporary measure every two years at ministerial conferences. Developing countries, including India, have argued for policy space to impose Customs duties on electronic transmissions, maintaining that the moratorium has adversely affected revenue collections.

 

More recently, however, Indonesia agreed under a bilateral trade deal with the US “to support a permanent moratorium on Customs duties on electronic transmissions at the WTO immediately and without conditions”.

 

A trade expert said that if New Delhi is prepared to prohibit the imposition of Customs duties on electronic transmissions, other trading partners, including the European Union (EU) under the recently finalised trade deal, will seek similar commitments. India’s negotiating leverage at the WTO on the issue would also weaken, the expert added.

 

The commerce and industry ministry did not respond to queries emailed by Business Standard until the time of going to press.

 

While India has scrapped the 6 per cent digital services tax, or equalisation levy, on online advertising services provided by foreign companies from April 1, 2025, to address Washington’s concerns, trade economist Biswajit Dhar said the US statement could imply a commitment from India that it will not reintroduce such a levy in the future.

 

The White House fact sheet was released against the backdrop of India and the US issuing a joint statement on Saturday announcing the finalisation of a framework for an interim trade agreement.

 

The US removed a 25 per cent punitive tariff imposed on India “in recognition of India’s commitment to stop purchasing Russian Federation oil”. A reciprocal tariff on India will be further lowered to 18 per cent and is expected to come into effect soon.

 

The joint statement shared limited details on digital trade. According to the statement, both countries committed to addressing “discriminatory or burdensome practices and other barriers to digital trade” and to setting “a clear pathway to achieve robust, ambitious, and mutually beneficial digital trade rules as part of the BTA”.

 

Further, in line with the roadmap outlined in the terms of reference for the bilateral trade agreement (BTA) finalised in March last year, both countries have agreed to continue negotiations to address the remaining tariff barriers, additional non-tariff barriers, technical barriers to trade, customs and trade facilitation, good regulatory practices, trade remedies, services and investment, intellectual property, labour, environment, government procurement, and trade-distorting or unfair practices of state-owned enterprises, the fact sheet said.