Business Groups Call for Delay of India’s New Digital Tax

A coalition of businesses is urging India to delay a new digital tax by at least nine months, and seek companies’ input on the measure.

India expanded its existing equalization levy through a budget bill passed in late March. Starting April 1, foreign e-commerce companies became subject to a 2% tax on online sales of goods or services into India.

“In the current circumstances, the timeframe within which this expansive new measure was approved and entered into force allowed for neither the dialogue nor the significant structural changes that would be necessary for impacted firms to effectively implement a levy of this scope and complexity,” nine business associations wrote in a letter to Indian Finance Minister Nirmala Sitharaman, released Wednesday.

The letter was signed by groups representing businesses from around the world, including the Information Technology Industry Council, the U.S. Chamber of Commerce, the Asia Internet Coalition, and DIGITALEUROPE. Member companies represented by the nine groups span multinationals, startups, and industries including tech, services, and manufacturing, the letter said.

The letter acknowledged that governments—and businesses—are “under immense economic strain” as they fight the coronavirus, and called for continuing an open investment and trade environment under the circumstances.

Delaying the measure would also send a signal that India is committed to the Organization for Economic Cooperation and Development’s work to find a global consensus solution on digital tax, the letter said.

The OECD is working to find agreement among nearly 140 countries by year-end on an overhaul of global tax rules that determine how multinationals, particularly tech giants, are taxed in the countries where they have users or consumers.