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India and the US have agreed on a 'transitional approach' on 'Equalisation Levy' 2020.

According to Ministry of Finance, India and the US will remain in close contact to ensure that there is a common understanding of the respective commitments and endeavor to resolve any further differences of views on this matter through constructive dialogue.

The final terms of the agreement shall be finalised by February 1, 2022.

Notably, on October 8, 2021, India and the US joined 134 other members of the OECD or G20 Inclusive Framework in reaching agreement on the 'Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy'.

Furthermore, on October 21, 2021, the US, Austria, France, Italy, Spain, and the UK reached an agreement on a transitional approach to existing 'Unilateral Measures' while implementing 'Pillar 1'.

"The agreement is reflected in the joint statement that was issued by those six countries on that date ('October 21 Joint Statement')."

Accordingly, India and the US have agreed that the same terms that apply under the 'October 21 Joint Statement' shall apply between the US and India with respect to India's charge of 2 per cent equalisation levy on e-commerce supply of services and the US' trade action regarding the said 'Equalisation Levy'.

"However, the interim period that will be applicable will be from 1st April 2022 till implementation of 'Pillar 1' or 31st March 2024, whichever is earlier," the ministry said in a statement.