India on Wednesday defended a new digital tax which faces opposition from big US tech firms such as Alphabet's Google and Facebook and the United States Trade Representative (USTR).
In its annual budget on Monday, the government said a 2 per cent equalization duty on foreign e-commerce companies imposed last year would apply even to companies that do not own the goods or provide the services on their platforms and if any part of the transaction is online, even if it this is only an online payment. "Basically if there is an economic benefit from a certain jurisdiction then there has to be some taxation in that jurisdiction," Trade Secretary Anup Wadhawan said during a news briefing in New Delhi.
The government's clarification in the budget added that royalty and fees for technical services would be excluded, industry officials said.
India has been in talks with US about a bilateral trade agreement and the new President Joe Biden's administration has been encouraging, with talks ongoing, Mr Wadhawan said.
The two countries have been struggling for more than a year to conclude the limited trade deal, sparring over higher tariffs and New Delhi's policies on e-commerce and data storage.
"The status is very good. We have a very, very strong and close relationship with US ... the sticking points have been largely addressed," Mr Wadhawan added.
Foreign Minister Subrahmanyam Jaishankar last month told Reuters that talks had become bogged down.
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