New Delhi & Washington, D.C. have mutually agreed on the acceptance of the digital tax following which the US has decided to withdraw the pending trade retaliation case against India. Global tax deal transition arrangement or Digital tax will terminate India’s digital services tax.
On October 8, 2021, 136 countries unitedly agreed on international tax reforms that contained the withdrawal of their share of digital service taxes. All these tax measures were taken to implement & enable the signatory countries to levy a minimum of 15 percent global minimum corporate tax on big profitable multinational corporations. The 136 countries also reached an agreement to not levy new digital service taxes before the OECD tax deal is finalized at the end of 2023.
For the implementation of the new international tax rules, the signatory countries have to withdraw taxes that fall under digital tax types. Also, the implementation of digital tax withdrawal will be in a phased manner which is named as Pillar-1 & Pillar-2.
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The Union Finance Ministry said in a statement that currently, India as per the American approach will levy a 1 percent tax on e-commerce supplies until the implementation of pillar 1 or before March 31, 2024.
Such international tax reforms are formulated towards increasing trade cooperation, on diverse types of goods. As of now, the signatory countries can continue to collect digital services tax until the new tax regime is been implemented. The 136 signatories of the said global digital tax deal comprise of over 90 percent of global GDP.
This tax deal empowers the signatory countries to levy taxes on large digital conglomerates including Google, Facebook, Microsoft, Amazon, and many such giants of the tech and digital industry.
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