India has adopted a Digital Sales Tax (2% equalisation levy) on revenue generated from a broad range  of  digital  services offered in India, including digital platform services, digital content sales, digital sales of a company’s own goods, data-related services, software-as-a-service and other categories of digital services. India’s DST only applies to “non-resident”companies. On June 2, 2020, USTR initiated an investigation of India’s Digital Sales Tax(DST) pertaining to discrimination against US Companies; retroactivity, and possibly unreasonable tax policy. On January 6, 2021, based on the information obtained during the investigation and the advice of the Section-301 committee, USTR determined that India’s DST is unreasonable or discriminatory and burdens or restricts US Commerce.

Section 301 and USTR Proposed Provisions

• Section 301 authorizes the USTR to impose duties on the goods of the foreign country subject to
• USA has proposed retaliatory tariffs up to 25% on select Indian products including Gem &Jewellery for 2% equalization levy being levied by the Indian Government that would collect duties on goods of India in the range of the amount of DST  that India is expected to collect from S. companies. Initial estimates indicate that the value of the DST payable by U.S.- based company groups to India will be up to approximately $55 million peryear.
• USTR further proposes that the goods of India subject to additional tariffs would be drawn from the preliminary list of
• Seventeen (17) Gem & Jewellery products are in the proposed list of 42 products subject to have increased duties and its exports to USA are going to be affected by over US$50 million.

The USTR Proposed Action is a setback to Indian Gems and Jewellery Sector. USA is India’s major export market for gem and jewellery products. Exports of around US$9.3 billion goes to the USA market accounting for 25.6% of the total gem and jewellery exports of US$36 billion from the country.

Therefore it needs to be asserted, opine GJEPC that if the proposed action in terms of raising tariff rates on the import of the above stated gem and jewellery products get implemented after the hearing process which is going to end in May 2021, this would adversely impact gem and jewellery  exports  of  around US$46 million to US$53 million  and would be amajor setback to oneofthemostlabour-orientedandexportsectorofthecountry. In view of this, impending hurdle in exports to the USA, GJEPC requests the government of India and USA to devise a mutually beneficial action plan which will boost trade between the two nations.

Key Issues relating to U.S. Proposed Action

• This is a unilateral action by the U.S. No basis under international law.
• It is possible U.S. may use this as a threat only. And follow up on OECD negotiations
• With regard to China S.301 investigations, U.S. imposed the tariffs, and China took the matter to the WTO and won at the WTO Panel Stage.
  • S. has however appealed the ruling; so the ruling cannot come into effect.
• With regard to France S.301- DST investigation, U.S. determined tariffs, but has not yet imposed these retaliatory tariffs.
• What U.S. does for India in June 2021: Uncertain.
• Bilateral dialogue, and Multilateral OECD negotiations- will be occurring in parallel.

Pointers for the Submission

Highlight benefits to the US Market:

• Saving of around 6 to 14% duty applicable on the imports of various jewellery products including gold/silver/imitation jewellery from India
• Improvised price competitiveness of various jewellery products will result in more margins and profitability for USA importers and increased tax revenues for the US Federal, State and local Governments.  
• Generation of volume based growth in the US industry
• Support the US retailer business with the increased availability of versatile jewellery at affordable rates.
• Any benefits to US small businesses which can be highlighted.
• Indian jewellery companies are financing US jewellery retail business by giving long credit and memo facilities to large retailers since most of the jewellers are not getting bank finance in U.S. Reduced margins and the recent restrictions by Indian banks have affected the ability of these companies to finance.
• Benefits for U.S. Workers & U.S. Consumers

Interestingly, before its implementation, USTR has invited comments from interested persons with respect to whether action is appropriate, and if so, the appropriate action to be taken. You may submit your comments at USTR website.
Following are the steps to submit the comments at USTR:

Step 1 : Click link https://comments.ustr.gov/s/

Step 2 : Choose India block:

Step 3 : In public docket, comments are invited Public docket: https://comments.ustr.gov/s/docket?docketNumber=USTR-2021-0003 

Step 4 : For submitting comments  Click the button and furnish your information and upload your comments.

Key Dates:

April 21st: By this date, any person wishing to submit comments needs to submit requests to appear at a hearing, along with a summary of the testimony

April 30^th: By this date, the  comments have to be uploaded.