India should avoid digital tariffs despite WTO moratorium lapse

India should avoid imposing tariffs on digital trade after the WTO moratorium expiry, as seamless data flows are crucial for services exports and global investment

An interim arrangement under the World Trade Organization (WTO) enabled tariff-free trade in electronically-delivered products and services, including software, cloud-based services, and digital content, for about three decades. The moratorium was extended 11 times since it was first adopted in 1998. However, it has now expired as WTO members failed to extend it at the 14th WTO Ministerial Conference (MC14) in Yaounde, Cameroon, in March this year. It is likely that countries may not impose tariffs immediately, but the expiry has increased uncertainty at a time when trade is already under pressure from rising protectionism and geopolitical tensions. 

Until recently, India was opposed to extending the moratorium, arguing that developing economies were forgoing valuable revenues. A United Nations Trade and Development (Unctad) study estimated that developing countries like India could lose nearly $25 billion annually in potential tariff revenue because of the moratorium. However, India must look at its larger interests. According to WTO data, India became one of the world’s largest exporters of digitally delivered services in 2025, with overseas sales hitting $328 billion. Since 2005, it has consistently maintained a trade surplus in digitally delivered services, reflecting the growing importance of software, financial technology, research & development, and cloud-enabled exports. The country now hosts more than 2,100 global capability centres (GCCs), generating nearly $100 billion in annual revenue and serving multinational corporations across information technology, finance, engineering, artificial intelligence, and research. These businesses depend on seamless cross-border digital flows. 

Any fragmentation of the rules on digital trade would increase compliance costs, complicate investment decisions, and weaken India’s attractiveness as a global innovation and services hub. Imposing tariffs may lead to similar action from other trading partners, which would affect India’s exports. The country is also looking to deepen trade relations with the developed world, including the United States and the European Union, and such tariffs could create complications. The transformation in Indian services and its broader position explain New Delhi’s shift at MC14, where it supported extending the moratorium until 2030. The change reflects a simple economic reality: The benefits from expanding digital exports outweigh the limited tariff revenue India might collect by imposing Customs duties. Thus, even though the expiry of the WTO moratorium gives members the option to impose Customs duties on electronic transmission, India should refrain from doing so. Besides, WTO members never reached a common understanding of what constitutes an “electronic transmission” or whether the moratorium applies only to the medium of the transmission or also to the digital content itself. Unlike physical goods, digital designs do not pass through Customs checkpoints. Determining their origin, Customs value and point of import would be legally and technically complex. 

Meanwhile, it’s worth highlighting that the nature of trade evolution is shifting. The WTO’s “Joint Statement Initiative (JSI) on Electronic Commerce”, involving 91 members accounting for around 90 per cent of global trade, has negotiated a stabilised text on ecommerce rules. India has remained outside the initiative because of concerns over plurilateral rule-making. Indian policymakers must reconsider their stand. Being part of such initiatives will allow India to participate in the process of setting standards and rules. Given its size and strategic interests, India must have a voice in forums where trade rulebooks are designed.