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Indian Express
3 days ago
- Business
- Indian Express
India-US trade deal: Commerce Ministry advised against accepting ‘unilaterally framed obligation' on digital taxes
Legal advisers to the Commerce and Industry Ministry have suggested that Indian negotiators dealing with their US counterparts should not accept Washington's proposal that prohibits India from reintroducing equalisation levy-style taxes, such as the 'Google tax', in the future, a person aware of the negotiations told The Indian Express. The advice was offered on the grounds that the provisions drafted by the US did not state that both parties should refrain from applying digital taxes on each other. Rather, they sought a legal commitment only from the Indian side and were seen as a 'unilaterally framed obligation', the source said. While the US offers a range of digital services in India and American tech companies have long lobbied against any taxes on such services, India also exports a wide range of digital services to the US — particularly in the IT sector — generating the majority share of its total services exports earnings from the US market. Another concern raised with the government was that agreeing to such unilateral provisions could set a risky precedent for future trade negotiations, where similar demands could be made by other trading partners during talks with New Delhi, thereby complicating future negotiations. In a move to assuage US concerns about India being a high-tariff nation, the Central government in March proposed abolishing the equalisation levy on online advertisements as part of the amendments to the Finance Bill, 2025. An equalisation levy is a measure to 'equalise' the tax treatment of resident and non-resident e-commerce companies. As part of the 35 amendments to the Finance Bill, 2025, the Centre proposed removing the 6 per cent equalisation levy (EL) it charges on digital ads, effective from 1 April 2025. A query emailed to the Commerce and Industry Ministry remained unanswered till press time. 'Digital taxation is typically discussed outside the framework of a trade agreement. It is a nation's sovereign right to decide on such matters, and India should reserve that right. Bringing it under the scope of a trade agreement weakens your position. We need to examine the digital trade chapters of the US and Australia, which India must study carefully. Australia has provided the US with a carve-out that allows for protections for US services. We also need to secure our IT/ITeS and technology exports from taxation in the US, our largest market' Arpita Mukherjee, professor at Indian Council for Research on International Economic Relations (ICRIER) said. Notably the US has forced Indonesia to several steep terms on digital trade. Indonesia has committed to address barriers impacting digital trade, services, and investment, a White House statement said. 'Indonesia will provide certainty regarding the ability to transfer personal data out of its territory to the United States. Indonesia has committed to eliminate existing HTS tariff lines on 'intangible products' and suspend related requirements on import declarations; to support a permanent moratorium on customs duties on electronic transmissions at the WTO immediately and without conditions; and to take effective actions to implement the Joint Initiative on Services Domestic Regulation, including submitting its revised Specific Commitments for certification by the World Trade Organization (WTO),' the White House statement read. The United States Trade Representative (USTR), in its report on non-tariff barriers, had earlier cited the 6 per cent equalisation levy as a discriminatory measure against US firms. The USTR report said that most digital services taxes are designed in ways that discriminate against US companies, often singling out American firms for taxation while excluding domestic companies engaged in similar lines of business. The US has also raised concerns about digital services taxes with a number of trade partners, particularly the EU. 'The disproportionate capture of US firms by the EU's Digital Services Act (DSA) and Digital Markets Act (DMA) is also noted as undermining US competitiveness due to increased compliance costs not borne by EU competitors,' the USTR said. Differences between India and the US assume significance as New Delhi continues to face the risk of 26 per cent reciprocal tariffs. After Indian negotiators completed another round of discussions in Washington last week, a US team led by the US Trade Representative for South and Central Asia, Brendan Lynch, is expected to visit India in mid-August to continue negotiations for a trade agreement. While India and the US have agreed on a wide range of tariff lines, the negotiations — which currently only involve market access for goods — remain stuck over sensitive sectors such as agriculture and automobiles, which are key job creators in India. Ravi Dutta Mishra is a Principal Correspondent with The Indian Express, covering policy issues related to trade, commerce, and banking. He has over five years of experience and has previously worked with Mint, CNBC-TV18, and other news outlets. ... Read More
Indian Express
5 days ago
- Business
- Indian Express
India not ‘tariff king', says Commerce Secretary Sunil Barthwal
Commerce Secretary Sunil Barthwal on Friday said that India can face competition and is not the 'tariff king', as India's average tariffs for the UK following the trade deal are set to drop to 3 per cent compared to the current levels of 15 per cent. Barthwal said at a press briefing that India and the UK have managed to strike the 'right balance between strengths and sensitivities', and that the government will begin capacity-building of exporters to make full use of the tariff concessions achieved in the UK trade deal. 'FTAs are done, but the gains from the concessions can only come through stakeholder involvement. We have got concessions in textiles, leather footwear and processed footwear sectors, where tariffs were as high as 70 per cent. Now, the Commerce and Industry Ministry will begin capacity-building of our exporters,' Barthwal said. Barthwal said that fears of dumping are unfounded, as the trade deal has rules of origin and product-specific rules in place to address such concerns, adding that the deal is expected to be ratified by the UK government within a year, as it must pass through both Houses of the British Parliament. 'The regulatory ecosystem between the two countries will also be improved. In this FTA, there are timelines as to when the mutual recognition agreement is supposed to be completed. This will improve certainty for businesses operating in both countries,' Barthwal said. Government officials said that India's major exports — from labour-intensive sectors like textiles, gems & jewellery, leather and footwear, machinery, pharmaceuticals, and processed foods — are set to gain a major edge with zero-duty access to the UK, improving the competitiveness of Indian goods in the UK market. 'The UK market opens up duty-free for nearly all Indian agri-exports, with just a few limited exceptions like pork, chicken, eggs, rice, and sugar. A golden opportunity for our farmers and agri-entrepreneurs to shine on a global stage,' the Commerce and Industry Ministry said. The ministry said India has safeguarded its sensitive sectors — dairy, cereals and millets, pulses, and vegetables to high-value items like gold, jewellery, lab-grown diamonds, and certain essential oils. 'Strategic exclusions also cover critical energy fuels, marine vessels, worn clothing, and critical polymers and their monofilaments, smartphones, optical fibres — a strong stand to protect farmers, MSMEs, and national interests,' the ministry said. Notably, India has opened 89.5 per cent of its tariff lines, covering 91 per cent of the UK's exports, and only 24.5 per cent of the UK's export value will enjoy immediate duty-free market access. 'Strategically important products — particularly those where domestic capacity is being built under flagship initiatives like Make in India and PLI — will see concessions over periods of 5, 7, or even 10 years with gradual tariff reduction,' the ministry said. Joint Secretary in the Ministry of Commerce and Industry, Darpan Jain, said that the UK has offered its best FTA deal to India compared to all its trade partners in services adding that the UK has provided comprehensive and deep market access in 137 sub-sectors. India has a trade surplus of around $6.6 billion with the UK, with exports of $19.8 billion and imports of $13.2 billion in FY25. Jain said the UK's commitments on mobility are comprehensive and the best in any FTA. 'The UK has provided an assured mobility regime for various categories of natural persons: Business Visitors (BV) for all sectors — 90 days in any six-month period; Intra-Corporate Transferees (ICT) for all sectors including partner and dependent — three years.' The ministry said that the UK has accorded Indian suppliers a legal guarantee to participate in the UK procurement market — worth approximately $122 billion — for procurements conducted at the Central level of government and certain utilities. India, similarly, opens up a market opportunity of $114 billion. 'For the first time, the UK agreed to take a binding commitment to provide non-discriminatory treatment to our suppliers under the UK's Social Value regime. The UK's threshold for goods and services is approximately Rs 1.6 crore; India's threshold is approximately Rs 5.5 crore. For procurement related to construction services, both sides have agreed to a similar threshold of Rs 60 crore,' the ministry said. A government official said that India has taken a complete carve-out for its MSME preferential procurement policy. 'With respect to the Make in India policy, access to UK suppliers is restricted to eligibility to participate as deemed 'Class-II local suppliers' in domestic tenders above the agreed thresholds. Indian suppliers will continue to receive preferential treatment as 'Class-I local suppliers' in the UK,' the official explained.
Scroll.in
6 days ago
- Business
- Scroll.in
India and UK sign free trade agreement, PM Modi says farmers, MSMEs will benefit
India and the United Kingdom on Thursday signed a Comprehensive Economic Trade Agreement. The free trade agreement was signed by Commerce Minister Piyush Goyal and his British counterpart Jonanthan Reynolds during Prime Minister Narendra Modi's visit to the United Kingdom. 'Today marks a historic day in our bilateral relations,' Modi said in a press statement beside UK Prime Minister Keir Starmer after the signing. He said that the agreement aimed to benefit Indian farmers, the micro, small and medium enterprises sector, footwear and jewellery exports, as well as the seafood and engineering goods sectors. Modi also said that British medical devices and aerospace parts would be more easily sold in India. Starmer, on his part, said that the trade deal would help British workers in cutting-edge manufacturing, and would also benefit whiskey distillers across Scotland and the service sector in London, Manchester and Leeds. The UK prime minister said that the agreement was 'the biggest and most economically significant' trade deal the United Kingdom has made since Brexit – when Britain exited the European Union in 2016. The UK government said that the trade deal was set to increase bilateral trade between the two countries by nearly 39% in the long run, The Indian Express reported. This would be equivalent to $34 billion a year compared with the projected 2040 levels of trade in the absence of an agreement, currently at $21 billion annually. In his statement, Modi also thanked Starmer for his support after the Pahalgam terror attack. 'We are united in the belief that there is no place for double standards in the fight against terrorism,' the Indian prime minister said. The terror attack at Baisaran near Pahalgam town in Jammu and Kashmir on April 22 left 26 persons dead and 16 injured. The terrorists targeted tourists after asking their names to ascertain their religion, the police said. All but three of those killed were Hindu. 'We also agree that the forces which espouse extremist ideologies should not be allowed to misuse democratic freedoms,' Modi added. 'Those who misuse democratic freedoms to undermine democracy itself must be held to account.' The Indian prime minister also said that 'today's era demands development, not expansionism'. New Delhi and Britain had announced the free trade agreement in May after more than three years and 14 rounds of negotiations. With the agreement, India opens its doors to high-end British cars and whisky in a phased manner. The agreement ensures comprehensive market access for goods across all sectors, covering all of India's export interests, The Indian Express reported. India's Commerce and Industry Ministry had earlier said that the country would benefit from tariff elimination on approximately 99% of tariff lines, covering nearly 100% of trade value.
NDTV
6 days ago
- Business
- NDTV
India To Benefit From UK Trade Deal With 99% Tariff Elimination On Exports
Two months after India and United Kingdom concluded Free Trade Agreement (FTA), the two countries are poised to sign the mutually beneficial landmark trade pact during Prime Minister Narendra Modi's visit to UK beginning on Wednesday. Ahead of PM Modi's visit, the Union Cabinet approved the FTA on Tuesday. The deal, called the Comprehensive Economic and Trade Agreement (CEPA), is set to be signed on Thursday in presence of PM Modi and British Prime Minister Keir Starmer. Commerce and Industry Minister Piyush Goyal will also be in London for the crucial trade deal. India and UK had announced the conclusion of agreement on May 6 and the full text of the deal was held back pending final legal review. The idea behind the trade deal is to eliminate or reduce tariffs on imports and exports between the two nations. This should make Indian products competitive in the UK and vice versa. Both nations desire to increase their trade to USD 120 billion by 2030. As announced earlier, India is set to benefit from the elimination or reduction of tariffs on about 99 per cent of its exports to the UK post the FTA. The FTA is expected to boost key sectors such as textiles, leather, footwear, sports goods and toys, marine products, gems and jewellery, engineering goods, auto parts and engines, and organic chemicals. "The FTA ensures comprehensive market access for goods, across all sectors, covering all of India's export interests. India will gain from tariff elimination on about 99% of the tariff lines covering almost 100% of the trade value offering huge opportunities for increase in the bilateral trade between India and the UK," Commerce and Industry Ministry had said in its release on May 6. . India, in turn, will reduce tariffs on 90 per cent of its imports from UK (tariff lines) in phases, with 64 per cent seeing an immediate cut. The British food and drinks sector will be among the immediate beneficiaries of the trade deal. Nearly 90 per cent of UK exports in this category are Scotch whisky, which currently faces a 150 per cent tariff. Under the new agreement, tariffs on whisky and gin will initially drop to 75 per cent, and further to 40 per cent over a period of ten years. The agreement also includes commitments on services, covering IT/ITeS, financial and professional services (including architecture and engineering), as well as educational services. It will simplify mobility for Indian professionals and provide a three-year exemption from social security contributions in the UK for temporary Indian workers and their employers. Social security contributions post FTA will be paid in India, rather than in both places. Automotive tariffs is set to be cut from over 100 per cent to 10 per cent under a tariff rate quota system. This could pose a significant challenge to the Indian automobile sector and run counter to the 'Make in India' initiative. The UK government announced on May 6, 2025 that the country had concluded a free trade agreement (FTA) with India describing it as a "huge economic win for the UK" and a "landmark trade deal". It emphasised the potential of the Indian market with its economy expected to be the third largest in the world by 2028. Some issues like details of auto quotas and carbon border taxes are still to be revealed. Politico earlier reported that the latter is being dealt with outside the trade deal in separate, ongoing negotiations. In addition, negotiations on a Bilateral Investment Treaty (BIT) are ongoing. In his departure statement, PM Modi said that India and UK share a Comprehensive Strategic Partnership that has witnessed significant progress in recent years. "Our collaboration spans a wide range of sectors, including trade, investment, technology, innovation, defence, education, research, sustainability, health and people-to-people ties," he said. PM Modi said that during his meeting with the UK Prime Minister, they will have the opportunity to further enhance our economic partnership, aimed at fostering prosperity, growth and jobs creation in both countries. After UK, PM Modi will also visit Maldives in the second leg of his two-nation tour.
Indian Express
7 days ago
- Business
- Indian Express
PM Modi arrives in London ahead of key India-UK free trade agreement signing
Prime Minister Narendra Modi arrived in the London early Thursday, ahead of the formal signing of a long-awaited Free Trade Agreement (FTA) between India and the United Kingdom, marking what both countries have described as a turning point in bilateral relations. 'This visit will go a long way in advancing the economic partnership between our nations,' PM Modi said in a post on X, formerly Twitter. 'The focus will be on furthering prosperity, growth and boosting job creation for our people. A strong India-UK friendship is essential for global progress.' PM Modi was greeted by members of the Indian diaspora upon his arrival. Sharing photographs of the welcome on social media, he wrote: 'Touched by the warm welcome from the Indian community in the UK Their affection and passion towards India's progress is truly heartening.' The signing of the trade deal with British Prime Minister Keir Starmer is expected to be the centerpiece of PM Modi's visit. Though the agreement was announced on May 6, the final text was pending legal scrubbing. It comes after three years of political upheaval in Britain and follows a sweeping Labour Party victory in the recent general elections. Starmer described the FTA as a 'landmark' achievement and a 'major win for Britain.' He said the agreement would 'create thousands of British jobs across the UK, unlock new opportunities for businesses and drive growth in every corner of the country, delivering on our Plan for Change.' 'We're putting more money in the pockets of hardworking Brits and helping families with the cost of living,' Starmer added. 'We're determined to go further and faster to grow the economy and raise living standards across the UK.' The pact is India's first major trade agreement with a Western nation since it withdrew from talks on the China-led Regional Comprehensive Economic Partnership (RCEP) in 2019. The deal ensures broad market access for goods and services, and addresses key issues such as innovation, government procurement and intellectual property rights. It also includes a Double Contribution Convention Agreement — a social security pact between the two countries. For India, the agreement is expected to boost exports of textiles and leather products, while easing British access to the Indian market for high-end automobiles and whisky. According to India's Commerce and Industry Ministry, the FTA offers tariff elimination on approximately 99 per cent of tariff lines, covering nearly 100 per cent of trade value. According to the UK's Department for Business and Trade, India's average tariff on British goods will fall from 15 per cent to 3 per cent once the FTA is in effect. British companies will benefit from greater access to the Indian market for goods ranging from soft drinks and cosmetics to cars and medical devices. Whisky producers will see tariffs halved immediately, dropping from 150 per cent to 75 per cent, and then gradually reduced to 40 per cent over a decade. British officials also announced that nearly 6 billion pounds in new investment and export agreements had been secured. Twenty-six British companies, including Airbus and Rolls-Royce, are poised to expand in India. Airbus aircraft deliveries to India — more than half powered by Rolls-Royce engines — are set to begin soon.
