What Happened
- A White House fact sheet on the India-US trade deal listed digital services taxes and e-commerce trade rules as key negotiation items, alongside IPR, labour standards, environment, and government procurement.
- The original fact sheet stated India would "remove its digital services taxes and commit to negotiate a robust set of bilateral digital trade rules," but a revised version softened this to India having "committed to negotiate" such rules.
- The deal framework also reiterated the US position on India reducing Russian oil purchases, with India expected to purchase $500 billion of US energy products, aircraft, precious metals, technology products, and coking coal over five years.
- The US reciprocal tariff rate on Indian goods was set at 18%, down from a threatened 50% that included punitive measures linked to India's energy purchases.
- The broader bilateral trade agreement will cover additional market access commitments on IPR, labour, environment, and government procurement.
Static Topic Bridges
India's Equalisation Levy (2016 and 2020)
India introduced the Equalisation Levy through the Finance Act 2016 as a unilateral measure to tax digital transactions by non-resident companies benefiting from the Indian market without a physical presence. The levy was designed as an interim measure pending a global consensus under the OECD framework.
- EL 1.0 (Finance Act 2016): 6% on payments exceeding Rs 1 lakh per annum to non-resident companies for online advertising services
- EL 2.0 (Finance Act 2020, effective 1 April 2020): 2% on consideration received by non-resident e-commerce operators for e-commerce supply or services, with a threshold of Rs 2 crore annual turnover
- The 2% e-commerce levy was abolished effective 1 August 2024; the 6% advertising levy was scrapped effective 1 April 2025
- The US Trade Representative (USTR) concluded in January 2021 that India's levy was "discriminatory," explicitly exempting Indian companies while targeting non-Indian firms
- India still taxes foreign digital companies through the Significant Economic Presence (SEP) framework (Section 9 of the Income Tax Act, amended by Finance Act 2018) and 18% GST on Online Information and Database Access or Retrieval (OIDAR) services
Connection to this news: Although India has already abolished both equalisation levies, the US is now seeking binding commitments on digital trade rules to prevent future unilateral digital taxes and lock in customs duty moratoriums on electronic transmissions.
WTO Moratorium on Customs Duties on Electronic Transmissions
Since 1998, WTO members have maintained a practice of not imposing customs duties on electronic transmissions (e.g., software downloads, streamed content, e-books). This moratorium has been renewed at every WTO Ministerial Conference, most recently at MC13 (Abu Dhabi, 2024), where it was extended until MC14.
- First adopted at the Second WTO Ministerial Conference, Geneva (1998) as a temporary moratorium
- India and South Africa have repeatedly opposed making the moratorium permanent, arguing it costs developing countries significant customs revenue — estimated at $10 billion annually for developing nations
- The US and EU support making the moratorium permanent, arguing customs duties on digital products would fragment the internet and increase costs
- The India-US deal reportedly addresses "rules tied to customs duties on electronic transmissions," potentially locking India into a bilateral commitment not to impose such duties
- The OECD/G20 Inclusive Framework's Pillar One (Amount A) seeks to reallocate taxing rights to market jurisdictions; as of 2026, the Multilateral Convention to implement Amount A has not achieved sufficient signatories to enter into force
Connection to this news: The US push for bilateral digital trade rules with India represents a strategy to achieve through bilateral deals what has not been accomplished multilaterally — binding commitments on digital taxation and e-commerce duties.
India-US Bilateral Trade Agreement (BTA) Framework
The India-US trade relationship has historically been marked by periodic friction over tariffs, market access, and non-tariff barriers. The current interim trade deal announced in February 2026 is the first comprehensive trade framework between the two countries, preceded by earlier attempts at a limited trade package during 2019-20 that failed to materialize.
- Bilateral trade in goods (FY 2024-25): approximately $129 billion; trade deficit in favour of India
- The BTA negotiations were launched by President Trump and PM Modi on 13 February 2025
- US reciprocal tariff on Indian goods: 18% (reduced from threatened 50%); India's weighted average MFN tariff: approximately 14%
- India removed from the US Generalized System of Preferences (GSP) in June 2019; not yet restored
- Key US demands historically: greater access for dairy products (India's concerns over veterinary drug residues), medical devices (price controls under NPPA), IPR (patent regime, data exclusivity), and government procurement (India is not a signatory to the WTO Government Procurement Agreement)
- The deal framework includes "additional market access commitments and support more resilient supply chains"
Connection to this news: The inclusion of digital taxes, IPR, labour, environment, and government procurement in the BTA negotiation agenda signals a comprehensive US approach that goes beyond tariffs to address structural trade barriers, reflecting the template used in US trade agreements globally.
Key Facts & Data
- India's Equalisation Levy: 6% (2016, abolished April 2025) and 2% (2020, abolished August 2024)
- US reciprocal tariff on Indian goods: 18% (down from threatened 50%)
- India-US bilateral goods trade: approximately $129 billion (FY 2024-25)
- India's $500 billion purchase commitment: energy, aircraft, precious metals, tech products, coking coal over 5 years
- WTO e-commerce moratorium: in place since 1998, extended at MC13 Abu Dhabi (2024)
- OECD Pillar One: multilateral convention not yet in force; 140+ members of Inclusive Framework
- India removed from US GSP: June 2019; not restored