India and the United States have agreed to extend their transitional agreement on the Equalisation Levy until June 30. This decision comes after both countries initially joined 134 other members of the OECD/G20 Inclusive Framework in October 2021 to address tax challenges from the digitalization of the economy.
The United States, along with Austria, France, Italy, Spain, and the United Kingdom On October 21, 2021 reached a political compromise on transitional measures while implementing Pillar 1 of the global tax agreement. India and the United States later agreed to apply the same terms of this compromise to India’s 2% Equalisation Levy on e-commerce services and the U.S. trade response, as reflected in the November 24, 2021 statements.
The original agreement was valid from April 1, 2022, until either the implementation of Pillar 1 or March 31, 2024, whichever came first. However, due to ongoing negotiations and developments, including a call by the Inclusive Framework on December 18, 2023, for finalizing the Pillar 1 multilateral convention text by March 2024, and an extension of the political compromise by the United States and several European countries until June 30, 2024, India and the United States decided to extend their agreement accordingly.
All terms of the transitional approach remain unchanged, and both countries will continue to work closely to resolve any issues through constructive dialogue.