USTR announces Section 301 investigation against digital services taxes

The US Trade Representative’s office (USTR) has announced that it will start Section 301 investigations against India and nine others for imposing or considering digital services taxes that may affect American companies. According to the USTR office, it will conduct the investigation under the Section 301 of the Trade Act of 1974. This law authorises authorities to initiate action, including punitive tariffs, in response to a foreign country’s action that is deemed unfair or discriminatory and curbs American trade. India adopted a 2 per cent digital services tax in March. According to USTR, the tax applies only to non-resident companies, and covers online sales of goods and services to, or aimed at, persons in India. The tax applies only to companies with annual revenues in excess of approximately Rs 20 million. The tax went into effect on April 1. Tax expert Mukesh Butani said that the provision (of 2 per cent levy) needs clarity on various counts. According to a report in Business Standard, the action is not specific to India and would not impact trade talks between India and USA.