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Saturday, September 19, 2020

FM Sitharaman: Consensus-based solution to digital taxation should be simple and inclusive

India — in amendments to the Finance Act, 2020 in March-end — had expanded the ambit of the equalisation levy for non-resident e-commerce operators involved in supply of services, including online sale of goods and provision of services, with the levy at the rate of 2 per cent.

By: ENS Economic Bureau | New Delhi | July 19, 2020 12:21:04 am
Finance Minister Nirmala Sitharaman participates in the third Meeting of G20 Finance Ministers via video conferencing, in New Delhi, on Saturday. (Source: PIB)

Participating in a meeting of the G20 Finance Ministers and Central Bank Governors Saturday via a video link, Finance Minister Nirmala Sitharaman argued the consensus-based solution with regard to digital taxation should be simple, inclusive and based on a robust economic impact assessment. “Referring to the International Taxation agenda and the intended deliverable of formulating a solution for addressing challenges related to digital taxation, Sitharaman noted the progress on the agenda and said that it is imperative that this consensus based solution should be simple, inclusive and based on a robust economic impact assessment,” as per a statement by the Finance Ministry issued Saturday after the meeting held under the Saudi Arabian Presidency.

India — in amendments to the Finance Act, 2020 in March-end — had expanded the ambit of the equalisation levy for non-resident e-commerce operators involved in supply of services, including online sale of goods and provision of services, with the levy at the rate of 2 per cent. Equalisation levy at 6 per cent has been in force since 2016 on payment exceeding Rs 1 lakh a year to a non-resident service provider for online advertisements. This is applicable for e-commerce companies that are sourcing revenue from Indian customers without having tangible presence here in the country.

The office of the United States Trade Representative (USTR) last month initiated investigations into taxes adopted or under consideration by 10 nations, including India, on revenues of American digital service companies like Netflix, Airbnb, Uber and Spotify.

On the G20 April action plan on COVID-19 pandemic, Sitharaman highlighted the need for international coordination required in addressing the spill-over effects of exit strategies. She said India is working on balancing supply and demand side measures through measures including credit schemes for greater liquidity, direct benefit transfers, and employment guarantee schemes..

The G20 finance ministers and central bank governors in April published an Action Plan for the international response to the COVID-19 pandemic, covering the healthcare, economic and fiscal responses that G20 members have agreed to undertake, among others. She also pointed out “the procyclicality of credit rating downgrades by the rating agencies and its deterrent impact on policy options, particularly for emerging market economies.”

Meanwhile, RBI Governor Shaktikanta Das said in tweet, “Participated in virtual meeting of G20 Finance Ministers and Central Bank Governors today. Focused on macroeconomy, capital flows, cross border payments, transition from LIBOR and other issues.”

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