Notice2021-26198
Termination of Action in the Digital Services Tax Investigation of India and Further Monitoring
Primary source
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Published
December 2, 2021
Issuing agencies
Trade Representative, Office of United States
Abstract
On October 8, 2021, India joined the United States and 134 other jurisdictions participating in the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting in reaching a political agreement on a two-pillar solution to address tax challenges arising from the digitalization of the world economy. As part of Pillar 1, all parties agreed to remove existing Digital Services Taxes (DSTs) and other relevant similar measures, and to coordinate the withdrawal of these taxes. On November 24, 2021, India and the United States issued statements describing a transitional approach to India's DST prior to entry into force of Pillar 1. These statements reflect a political agreement that, in defined circumstances, the DST liability that U.S. companies accrue in India during the interim period will be creditable against future taxes accrued under Pillar 1 of the OECD agreement. Based on the commitment of India to remove its DST pursuant to Pillar 1 and on India's political agreement to this transitional approach prior to Pillar 1's entry into force, the U.S. Trade Representative has determined to terminate the section 301 action taken in the investigation of India's DST. In coordination with the U.S. Department of the Treasury (Treasury), USTR will monitor implementation of the removal of India's DST as provided for under Pillar 1 and the transitional approach agreed to by India.
Full Text
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<title>Federal Register, Volume 86 Issue 229 (Thursday, December 2, 2021)</title>
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[Federal Register Volume 86, Number 229 (Thursday, December 2, 2021)]
[Notices]
[Pages 68526-68528]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-26198]
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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Termination of Action in the Digital Services Tax Investigation
of India and Further Monitoring
AGENCY: Office of the United States Trade Representative (USTR).
ACTION: Notice.
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SUMMARY: On October 8, 2021, India joined the United States and 134
other jurisdictions participating in the OECD/G20 Inclusive Framework
on Base Erosion and Profit Shifting in reaching a political agreement
on a two-pillar solution to address tax challenges arising from the
digitalization of the world economy. As part of Pillar 1, all
[[Page 68527]]
parties agreed to remove existing Digital Services Taxes (DSTs) and
other relevant similar measures, and to coordinate the withdrawal of
these taxes. On November 24, 2021, India and the United States issued
statements describing a transitional approach to India's DST prior to
entry into force of Pillar 1. These statements reflect a political
agreement that, in defined circumstances, the DST liability that U.S.
companies accrue in India during the interim period will be creditable
against future taxes accrued under Pillar 1 of the OECD agreement.
Based on the commitment of India to remove its DST pursuant to Pillar 1
and on India's political agreement to this transitional approach prior
to Pillar 1's entry into force, the U.S. Trade Representative has
determined to terminate the section 301 action taken in the
investigation of India's DST. In coordination with the U.S. Department
of the Treasury (Treasury), USTR will monitor implementation of the
removal of India's DST as provided for under Pillar 1 and the
transitional approach agreed to by India.
DATES: The additional duties on products of India are terminated as of
November 28, 2021.
FOR FURTHER INFORMATION CONTACT: For questions concerning this notice,
please contact Benjamin Allen, Thomas Au, Patrick Childress, or Kate
Hadley, Assistant General Counsels at (202) 395-9439, (202) 395-0380,
(202) 395-9531, and (202) 395-3911, respectively, Robert Tanner,
Director, Services and Investment at (202) 395-6125, or Brendan Lynch,
Deputy Assistant U.S. Trade Representative for South and Central Asian
Affairs at (202) 395-2851.
SUPPLEMENTARY INFORMATION:
I. Proceedings in the Investigation
This investigation is addressed to India's 2020 ``equalisation
levy'', which is referred to throughout the investigation as India's
DST. See, e.g., 86 FR 30356 (June 7, 2021) and the India DST report,
published at <a href="https://ustr.gov/sites/default/files/enforcement/301Investigations/Report%20on%20India%E2%80%99s%20Digital%20Services%20Tax.pdf">https://ustr.gov/sites/default/files/enforcement/301Investigations/Report%20on%20India%E2%80%99s%20Digital%20Services%20Tax.pdf</a>. For
further background on the proceedings in the section 301 investigation
of India's DST, please see prior notices including: 85 FR 34709 (June
5, 2020); 86 FR 2478 (January 12, 2021); 86 FR 16824 (March 31, 2021);
and 86 FR 30356 (June 7, 2021).
On June 2, 2021, the U.S. Trade Representative determined to take
action in the form of additional duties on certain products of India
and to immediately suspend those additional duties for up to 180 days.
86 FR 30356 (June 7, 2021).
II. OECD/G20 Negotiations
One-hundred forty-one jurisdictions are engaged in international
tax negotiations under the OECD/G20 Inclusive Framework on Base Erosion
and Profit Shifting. On October 8, 2021, India joined the United States
and 134 other participants in reaching political agreement on a
Statement on a Two-Pillar Solution to Address the Tax Challenges
Arising from the Digitalisation of the Economy. OECD/G20 Base Erosion
and Profit Shifting Project, Statement on a Two-Pillar Solution to
Address the Tax Challenges Arising from the Digitalisation of the
Economy (Oct. 8, 2021) at <a href="https://www.oecd.org/tax/beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy-october-2021.pdf">https://www.oecd.org/tax/beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy-october-2021.pdf</a> (the OECD/G20 Two-Pillar
Solution). The statement provides that Pillar 1 will be implemented
through a multilateral convention. With respect to DSTs, the statement
provides:
The Multilateral Convention (MLC) will require all parties to
remove all Digital Services Taxes and other relevant similar
measures with respect to all companies, and to commit not to
introduce such measures in the future. No newly enacted Digital
Services Taxes or other relevant similar measures will be imposed on
any company from 8 October 2021 and until the earlier of 31 December
2023 or the coming into force of the MLC. The modality for the
removal of existing Digital Services Taxes and other relevant
similar measures will be appropriately coordinated.
III. India's Agreement
On November 24, 2021, The Ministry of Finance of the Government of
India and Treasury issued statements reflecting a political agreement
on a transitional approach to India's DST while implementing Pillar 1.
India and USA agree on a transitional approach on Equalisation Levy
2020, Ministry of Fin. of the Gov't of India (Nov. 24, 2021), <a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1774692">https://pib.gov.in/PressReleasePage.aspx?PRID=1774692</a>; Treasury Announces
Agreement on the Transition from Existing Indian Equalization Levy to
New Multilateral Solution Agreed by the OECD-G20 Inclusive Framework,
U.S. Dep't of the Treas. (Nov. 24, 2021), <a href="https://home.treasury.gov/news/press-releases/jy0504">https://home.treasury.gov/news/press-releases/jy0504</a>. Under this agreement and in defined
circumstances, the liability from India's DST that U.S. companies
accrue in India during the interim period will be creditable against
future taxes accrued under Pillar 1 of the OECD agreement. The period
during which the credit accrues will be from April 1, 2022, until
either the implementation of Pillar 1 or March 31, 2024, whichever is
earlier. In return, the United States commits to terminate the existing
section 301 trade action on goods of India, and not to impose further
trade actions against India with respect to its existing DST until the
earlier of the date the Pillar 1 multilateral convention comes into
force or March 31, 2024. Id.
IV. Termination of Action
Section 307 of the Trade Act of 1974, as amended (Trade Act) (19
U.S.C. 2417), provides that ``[t]he Trade Representative may modify or
terminate any action, subject to the specific direction, if any, of the
President with respect to such action, that is being taken under
section [301] of this title if . . . such action is being taken under
section [301(b)] of this title and is no longer appropriate.'' The U.S.
Trade Representative has found that the political agreement of India to
the OECD/G20 Two-Pillar Solution, which provides for the removal of
DSTs upon entry into force of Pillar 1, and the transitional approach
agreed to by India provide a satisfactory resolution of the matters
covered by the section 301 investigation of India's DST. Accordingly,
pursuant to section 307 of the Trade Act, the U.S. Trade Representative
has determined that the suspended trade action in this investigation is
no longer appropriate and that the action should be terminated.
The U.S. Trade Representative's determination was made in
consultation with Treasury and considers the advice of the interagency
Section 301 Committee, consultations with representatives of the
domestic industry concerned, and public comments and advisory committee
advice received during the investigations.
In order to implement the termination of the section 301 action in
the investigation of India's DST, subchapter III of chapter 99 of the
Harmonized Tariff Schedule of the United States (HTSUS) is modified by
the Annex to this notice.
V. Ongoing Monitoring
Section 306(a) of the Trade Act (19 U.S.C. 2416(a)) provides that
``[t]he Trade Representative shall monitor the implementation of each
measure undertaken, or agreement that is entered into, by a foreign
country to provide a satisfactory resolution of a matter subject to
investigation. . . .'' Section 306(b) (19 U.S.C. 2416(b)) provides that
``[i]f, on the basis of the monitoring
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carried out under subsection (a), the Trade Representative considers
that a foreign country is not satisfactorily implementing a measure or
agreement referred to in subsection (a), the Trade Representative shall
determine what further action the Trade Representative shall take under
section [301(a)].'' Pursuant to section 306(a) of the Trade Act, the
U.S. Trade Representative, in coordination with Treasury, will monitor
the implementation of the political agreement on an OECD/G20 Two-Pillar
Solution as pertaining to DSTs, India's agreement as reflected in the
November 24 statements, and associated measures. Pursuant to section
306(b) of the Trade Act, if the U.S. Trade Representative, in
consultation with Treasury, subsequently considers that India is not
satisfactorily implementing these political agreements or associated
measures, then the U.S. Trade Representative will consider further
action under section 301.
Annex
The U.S. Trade Representative has decided to terminate the
additional duties under heading 9903.90.03 of the HTSUS on articles the
product of India, as provided for in U.S. notes 24(a) and 24(b) to
subchapter III of chapter 99 of the HTSUS. The termination of these
additional duties is effective on November 28, 2021.
In accordance with this determination, the U.S. Trade
Representative has determined to modify the HTSUS by: (1) Deleting U.S.
notes 24(a) and 24(b) to subchapter III of chapter 99 of the HTSUS; and
(2) by deleting HTSUS heading 9903.90.03. The modifications of the
HTSUS are effective on November 28, 2021. Any provisions of previous
notices issued in this investigation that are inconsistent with this
notice are superseded to the extent of such inconsistency.
Greta Peisch,
General Counsel, Office of the United States Trade Representative.
[FR Doc. 2021-26198 Filed 12-1-21; 8:45 am]
BILLING CODE 3290-F2-P
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