U.S. investigation into India's digital tax is not an act of aggression, Indian government says source

NEW DELHI: The U.S. government's move to launch a commercial investigation into a digital services tax adopted by several countries, including India, should not be seen as an offensive move against New Delhi, a senior Indian government source said on Wednesday.

The office of the US envoy is investigating digital service taxes adopted or being considered by India and other countries such as Italy and Brazil, he said on Tuesday, a move that could lead to new tariffs and increase trade tensions.

"A number of US allies, such as the EU and the UK, are on this list … this USTR action is intended to address the issue of digital taxation and should not be seen as an act of aggression against India," he said. the government source, refusing to be identified due to the sensitivity of the issue.

The Indian Ministry of Commerce did not immediately respond to an email from Reuters for comment. The Indian government has not yet officially commented on the USTR investigation.

As of April 1, India has imposed a new 2% tax on foreigners' charges or transactions where companies pay abroad for digital services provided in India. The tax also applies to foreign e-commerce transactions on sites such as Amazon.com.

The tax is also levied on advertising revenue earned by companies abroad if those ads ultimately target customers in India. Google's Alphabet Inc. He was particularly concerned that he would not be able to quickly identify countries where such advertising regulations had come into force, Reuters reported.