India will engage with the US on the probe launched by the United States Trade Representative (USTR) against taxes on digital transactions levied by 10 countries. The USTR launched “Section 301” investigations against India and other countries as it feels that taxes imposed by them on e-commerce activity are discriminatory and negatively impact US companies.

Section 301 of the US Trade Act empowers USTR to investigate a trading partner's policy action which may be deemed unfair or discriminatory and negatively affects US companies. India had imposed a 2 percent levy on payments made by suppliers to e-commerce portals by expanding the scope of “Equalisation Levy” in this year's budget.

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The Section 301 investigation was launched by USTR on a day when US President Donald Trump had a telephonic conversation with Prime Minister Narendra Modi on issues like India joining the G7 and border tensions between China and India.

Indian officials pointed out that there are enough provisions in the US law that mandates consultations with trading partners regarding a Section 301 investigation. “ We will have the opportunity to defend our taxation policy. Even if the USTR determines India’s policy is an unfair trade practice, India will have another opportunity to negotiate with the U.S. and prevent the imposition of tariffs,” a government official told CNBC-TV18.

According to officials, US and France are still engaged in talks after a USTR probe claimed that a digital levy by the European nation was unfair. “Despite USTR stating in its report that France’s policy is unfair and is a burden on US commerce, no tariffs have been imposed by the US against France. Both sides are in negotiations to avoid tariffs and reach a comprehensive outcome,” the official added.

Indian Trade diplomats also maintained that the USTR probe is not specifically targeted against India. “The USTR probe on Digital Taxes includes several close allies of the US like the UK and EU. This is the first step of initiation and in no way represents definitive action against the Indian government. Moreover, this is not an imposition of tariff or any punitive measure on India,’ the official added.

First Published:Jun 3, 2020 12:24 PM IST