India has clarified that that the digital tax on Google, Amazon, Facebook, others is not biased against the US. The income tax department had introduced changes in the taxation department by introducing a new 2% levy on digital transactions conducted in India by foreign e-commerce companies. The IT department had amended the challan ITNS 285, which is used to taxes for online transactions. Now the challan asks for PAN number of the e-commerce company and if they are an ‘Outside India’ company, they will be charges extra tax.

The clarification was required because the European Union threatened to charge US firms with digital tax after US quit talk for a global deal. US think India too has imposed this tax for a way to get back at US. Therefore India issued a clarification that the tax is not biased just against the US but will be applicable to all the foreign e-commerce companies. A lobby group of all the US firms in India have said in a collective statement that they are not willing to pay the digital tax. A similar dispute resulted in US imposing 25% tax on French goods worth nearly $ 1.3 billion. In the case of France, France had not started collecting digital tax yet so the tariff on goods such as handbags, clothings, etc. will take effect after 6 months or so.

This imposition of extra tax shows that the Government has not paid any heed to the requests from online e-commerce companies and international businesses for a deferment for the year, as Covid-19 has hurt the business of all the companies. India has stated before that it will not reconsider the decision but is still in talks with the US, to ensure the US does not take a step which will damage their bilateral relations and to achieve a limited trade deal with ambitions for a free trade agreement in future. It has now become a global trend to charge a digital tax on foreign companies, we will have to see how many companies will accept this.