India may have to withdraw digital services tax or the equalisation levy and give a commitment not to introduce such measures in the future if the global minimum tax deal comes through.
In a major reform of the international tax system, 136 countries, including India, have agreed to an overhaul of global tax norms to ensure that multinationals pay taxes wherever they operate and at a minimum 15% rate.
However, the deal requires countries to remove all digital services tax and other similar measures and to commit not to introduce such measures in the future, as per the Organisation of Economic Cooperation and Development (OECD) implementation plan released late on Friday.
“No newly enacted digital services taxes or other relevant similar measures will be imposed on any company from October 8 and until the earlier of December 31, 2023, or the coming into force of the MLC (multilateral convention),” the OECD said.
The proposed two-pillar solution of the global tax deal consists of two components Pillar One which is about reallocation of additional share of profit to the market jurisdictions and Pillar Two consisting of minimum tax and subject to tax rules.
Finance Minister Nirmala Sitharaman had earlier this week said that India is “very close” to arriving at the specifics of the two-pillar taxation proposition at the G-20 and is in the last stage of finalising the details.
The Finance Ministers of G-20 countries are scheduled to meet on October 13, 2021 in Washington and finalise it.