India and US Extend 2% Digital Tax Agreement on E-commerce

India and the US have extended a 2% digital tax on e-commerce supplies until June 30, 2024. This decision follows an agreement reached with the OECD/G20 Inclusive Framework to address tax challenges arising from the digital economy. The terms remain consistent with the initial November 24, 2021 statements.

In a significant development, India and the United States have decided to extend the 2 percent equalisation levy, commonly known as the digital tax, on e-commerce supplies until June 30, 2024, according to a statement from the finance ministry released on Friday.

The decision comes as part of a broader reform of the international tax system. Both nations are active participants in the OECD/G20 Inclusive Framework, which includes 134 other members like Austria, France, Italy, Spain, and the UK. The aim is to address the unique tax challenges brought about by the digitalisation of the economy.

Initially agreed upon in October 2021, the framework's two-pillar solution was embraced by both countries, and an October 21, 2021 agreement outlined the transitional approach. As the validity of the agreement was set to expire, the Inclusive Framework called for the finalisation of the Pillar 1 multilateral convention text by March 2024, with a targeted signing ceremony by June 2024.

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