[Federal Register Volume 86, Number 7 (Tuesday, January 12, 2021)]
[Notices]
[Pages 2478-2479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00362]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Notice of Determination Pursuant to Section 301: India's Digital 
Services Tax

AGENCY: Office of the United States Trade Representative (USTR).

ACTION: Notice.

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SUMMARY: The U.S. Trade Representative has determined that India's 
Digital Services Tax (DST) is unreasonable or discriminatory and 
burdens or restricts U.S. commerce and thus is actionable under Section 
301.

FOR FURTHER INFORMATION CONTACT: For questions concerning the 
investigation, please contact Thomas Au or Patrick Childress, Assistant 
General Counsels at (202) 395-0380 and (202) 395-9531, respectively, 
Robert Tanner, Director, Services and Investment at (202) 395-6125, or 
Brendan Lynch, Deputy Assistant U.S. Trade Representative, South and 
Central Asian Affairs, 202-395-2851.

SUPPLEMENTARY INFORMATION:

I. India's DST

    Based on information obtained during the investigation, USTR has 
prepared a comprehensive report on India's DST (India DST Report). The 
India DST Report, which is posted on the USTR website at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes, includes a full description of India's DST. 
To summarize, India adopted the operative form of its DST on March 27, 
2020. India's DST imposes a two percent tax on revenue generated from a 
broad range of digital services offered in India, including digital 
platform services, digital content sales, digital sales of a company's 
own goods, data-related services, software-as-a-service, and several 
other categories of digital services. India's DST only applies to 
``non-resident'' companies. The tax applies as of April 1, 2020.

II. Proceedings in the Investigation

    On June 2, 2020, the U.S. Trade Representative initiated an 
investigation of India's DST pursuant to section 302(b)(1)(A) of the 
Trade Act of 1974, as amended (Trade Act). 85 FR 34709 (June 5, 2020) 
(notice of initiation). The notice of initiation solicited written 
comments on, inter alia, the following aspects of India's DST: 
Discrimination against U.S. companies and unreasonableness as tax 
policy. With respect to unreasonable tax policy, USTR solicited 
comments on, inter alia, whether the DST diverges from principles 
reflected in the U.S. and international tax systems, including 
extraterritorial application and taxing revenue rather than income.
    Interested persons filed over 380 written submissions in response 
to the notice of initiation. The public submissions are available on 
www.regulations.gov in docket number USTR-2020-0022.
    Under Section 303 of the Trade Act, the U.S. Trade Representative 
requested consultations with the Government of India regarding the 
issues involved in the investigation. Consultations were held on 
November 5, 2020.
    As noted, based on information obtained during the investigation, 
USTR has prepared and published the India DST Report, which includes a 
comprehensive discussion on whether the acts, policies, and practices 
under investigation are actionable under Section 301(b) of the Trade 
Act. The India DST Report supports findings that India's DST is 
unreasonable or discriminatory and burdens or restricts U.S. commerce.

III. Determination on the Act, Policy, or Practice Under Investigation

    Based on the information obtained during the investigation, and 
taking account of public comments and the advice of the Section 301 
Committee and advisory committees, the U.S. Trade Representative has 
made the following determination under sections 301(b) and 304(a) of 
the Trade Act (19 U.S.C. 2411(b) and 2414(a)): The act, policy, or 
practice covered in the investigation, namely India's DST, is 
unreasonable or discriminatory and burdens or restricts U.S. commerce, 
and is thus actionable

[[Page 2479]]

under section 301(b) of the Trade Act. In particular:
    1. India's DST, by its structure and operation, discriminates 
against U.S. digital companies, including due to the selection of 
covered services and its applicability only to non-resident companies.
    2. India's DST is unreasonable because it is inconsistent with 
principles of international taxation, including due to its application 
to revenue rather than income, extraterritorial application, and 
failure to provide tax certainty.
    3. India's DST burdens or restricts U.S. commerce.

IV. Further Proceedings

    Sections 301(b) and 304(a)(1)(B) of the Trade Act provides that if 
the U.S. Trade Representative determines that an act, policy, or 
practice of a foreign country is unreasonable or discriminatory and 
burdens or restricts United States commerce, the U.S. Trade 
Representative shall determine what action, if any, to take under 
Section 301(b). These matters will be addressed in subsequent 
proceedings under Section 301.

Joseph Barloon,
General Counsel, Office of the United States Trade Representative.
[FR Doc. 2021-00362 Filed 1-11-21; 8:45 am]
BILLING CODE 3290-F0-P