India has clearly conveyed to the US Trade Representative’s (USTR) office that it does not agree with the latter’s conclusion that the country’s 2 per cent equalisation levy on foreign e-commerce companies discriminates against American companies, Commerce Secretary Anup Wadhawan has said.

“If there is economic benefit in certain jurisdiction, there has to be some taxation in that jurisdiction. The whole argument of a permanent brick and mortar establishment does not work,” Wadhawan said, addressing media representatives on Wednesday. The OECD (Organisation for Economic Cooperation and Development) is also moving in that direction (as India), the Secretary said.

Wadhawan reasoned that as some countries have established presence in e-commerce, they were facing problems. However, when the situation becomes more balanced, these countries would want to impose taxation on foreign e-commerce companies operating in their jurisdiction.

“India’s DST (digital service tax, referred as equalisation levy in India) is discriminatory, unreasonable, and burdens or restricts US commerce, and thus, is actionable under Section 301 (of Trade Act, 1974),” the USTR said in its investigation report issued last month.

‘Protecting industries’

Commenting on the Budget, the Commerce Secretary said the proposed rationalisation of customs duty structure, with a thrust on both easy and competitive access to raw material and infant industry protection, aims to encourage exports, particularly of value-added products. This includes reduction in duties on critical raw-material such as iron and steel, copper scrap, naptha, nylon fibre and yarn. To rationalise the duty structure of gold and silver, the rates have been reduced to 7.5 per cent from 12.5 per cent with agriculture infrastructure and development cess of 2.5 per cent.

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