NEW DELHI: In the latest update to the US-India trade pact, Washington has said India has committed to removing its digital services taxes and to negotiating trade rules “that address discriminatory or burdensome practices and other barriers to digital trade”.
This statement came in a White House factsheet, released Monday, US time, that also made clear that the interim trade framework does not talk of any immediate changes to India’s domestic e-commerce policy, including restrictions on foreign investment in inventory-based retail.
The negotiations would cover rules prohibiting customs duties on electronic transmissions, a key US priority in global digital trade discussions, according to the factsheet.
Digital trade refers to cross-border transactions involving electronically delivered products and services.
For India, the joint statement issued Saturday remains the primary document on the India-US trade agreement, said a person aware of the matter, requesting anonymity.
Rules prohibiting customs duties on electronic transmissions, if they come into force, would prevent India from imposing import duties or similar charges on software downloads, apps, cloud services, digital media, e-books, online subscriptions or data transmitted over the internet, if they are delivered electronically and not as physical goods.
An expert said the overall impact of the proposed changes could be positive, if implemented. The moratorium on customs duties on digital trade remains a contentious issue at the WTO, with India and the United States holding divergent positions, noted Bipin Sapra, partner and indirect tax policy leader at consultancy EY India. For instance, he said, “the levy of GST on digital products under Online Database Retrieval Services has posed significant challenges, and its removal would help resolve several ongoing disputes.”
WTO position, Big Tech rules
The latest development comes in the backdrop of a recent presentation by India at the World Trade Organization, where its delegation resisted the current moratorium that prevents countries from imposing customs duties on digital products, including software, video games and audio-visual content delivered across borders.
India has also had cases of antitrust against Big Tech such as Play Store levies and a December proposal to tax artificial intelligence (AI) companies for using training data also came as a bolt from the blue.
In August 2024, India scrapped a 2% equalization levy on e‑commerce supplies and abolished the 6% Equalization Levy on online advertising, also called the “Google tax” since it was introduced in 2016. The removal, from 1 April 2025, was then seen as part of efforts to address US concerns about discriminatory digital taxes.
An industry body representing Indian communications and technology companies said the White House update on Monday was to ensure that digital trade, including e-commerce, cloud computing and cross-border digital services, can flow without new taxes or border charges. “For India, it is sensitive because it limits future policy space to tax or regulate digital flows, which is why the issue is being framed in the fact sheet as something to be negotiated, not already agreed,” said RK Bhatnagar, director general, Voice of Indian Commtech Enterprises.
Beyond digital trade
The digital trade push is part of a broader interim trade framework announced in a joint statement late on Saturday, following a call last week between US President Donald Trump and Prime Minister Narendra Modi. Both sides reaffirmed their commitment to negotiations on a wider US–India Bilateral Trade Agreement.
India is set to gain zero-duty access for goods worth around $44 billion, nearly half of its merchandise exports to the US, under the first phase of the agreement, commerce and industry minister Piyush Goyal said on Saturday.
The US agreed to reduce tariffs on Indian produce to 18%, with an executive order signed last Friday to formalize the move. The US said this followed New Delhi’s commitment to stop purchasing crude oil from Russia.
But, on Monday, ministry of external affairs secretary Vikram Misri said India’s “approach is to maintain multiple sources of supply and diversify them as appropriate to ensure stability” without naming Russia. The US has yet to react to this statement.
India has also agreed to address non-tariff barriers in priority areas, negotiate rules of origin, and strengthen cooperation on supply-chain resilience, investment reviews, export controls, and technology trade. Key product commitments include dried distillers’ grains, red sorghum, tree nuts, soybean oil, certain pulses, and wines and spirits.
Of these commitments, pulses are notable. India’s lentil imports from the US surged to $78.43 million in FY25 from $21.11 million in FY24. It is not yet clear what duties will apply to the “certain pulses” mentioned in the factsheet; Currently, India imposes a 30% duty on yellow peas imports and 10% on lentils.
Bilateral trade in goods between India and the US rose to $131.84 billion in FY25, up 10% from FY24, with Indian exports to the US increasing 11.6% to $86.51 billion.
