India – US have decided to agree upon a transitional approach on 2% Equalisation Levy of 2020.
 
Chronology of the key events and approach adopted is as follows:
 
1.    In the month of October 2021, India along with US and other OECD member countries agreed to have a framework in reaching conclusive agreement on ‘Two Pillar” solution to address tax issues arising out of digital economy
 
2.  Settlement in this regard has been reached between US and various countries like UK, Austria, Italy, France and Spain
 
3.  Final agreement with India on similar lines is expected in February 2022
 
4.  Under this agreement India will continue to impose the levy March 31, 2024, or till the implementation of Pillar 1 of the OECD agreement.
 
(Pillar I provide taxing rights with local markets. A portion of profits of the Multinational Enterprise is allocated to market jurisdictions)
 
5.  US on the other hand would terminate the currently-suspended additional duties on goods of India that had been adopted in its investigation
  
Upon roll out of the OECD India would have to withdraw its Equalisation Levy

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