America, European Union urged India not to bring digital tax. Nvidia Intel shocked by India’s stance on data transfer charges
America, European Union urged India not to bring digital tax. Nvidia Intel shocked by India’s stance on data transfer charges
The World Semiconductor Council (WSC) has urged India to reconsider this stance, warning that such actions could lead to increased costs, a global chip shortage, and India’s inability to become a global chip leader.
One’s ambitions may be hindered. Imposing duties on chip design data could have a negative impact on India’s semiconductor industry, potentially affecting more than 20% of the world’s semiconductor design workforce located in India.
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The move could also conflict with India’s efforts to attract semiconductor investment and grow its semiconductor industry, as highlighted by studies recommending tax incentives and policy reforms to strengthen India’s semiconductor competitiveness. Has happened##.
India’s proposed digital tax
India has introduced a digital tax known as Equalization Levy (EL). Initially implemented in 2016, the EL was imposed on online advertisements and related payments. From April 1, 2020, the scope of EL was extended to cover all non-residents operating e-commerce platforms. The levy on consideration received by e-commerce operators from e-commerce supplies or services has been fixed at 2%. Income under EL is tax-free under other provisions of the Indian Income Tax Act starting from the financial year 2021-22.
1998 ban on digital tax
India introduced a digital tax called Equalization Levy (EL) in 2016, initially targeting online advertisements and related payments. From April 1, 2020, the scope of this levy was expanded to cover all non-residents operating e-commerce platforms.
The EL is set at 2% on the consideration received by e-commerce operators from e-commerce supplies or services. Income subject to this levy is tax-free under other provisions of the Indian Income Tax Act starting from the financial year 2021-22.
##Objective of WTO’s moratorium on customs duties on electronic transmissions##—
The purpose of the WTO moratorium on customs duties on electronic transmissions, which has been in place since 1998, is to prevent WTO members from imposing customs duties on electronic transmissions.
This blocking covers a wide range of digital content, including software, emails, text messages, digital music, movies and video games. The Agreement is periodically reviewed and extended at WTO Ministerial Conferences every few years.
The purpose of the moratorium is to facilitate digital trade, prevent revenue loss for countries that are net importers of digital services and products, and support the growth of the digital economy globally.
—WTO’s ban on customs duties on electronic transmissions—
The WTO prohibition on customs duties on electronic transmissions was first introduced at the WTO’s Second Ministerial Conference in 1998 as part of the Global Declaration on E-Commerce.
The purpose of the freeze is to prevent WTO members from imposing customs duties on electronic transmissions, including software, email, text messages, digital music, movies and video games.
The moratorium is reviewed periodically and extended at WTO ministerial conferences every few years. The last extension took place in June 2022, and is due to expire at the 13th WTO Ministerial Conference in February 2024, unless WTO members decide to make it permanent or extend it temporarily until the next Ministerial Conference.
The purpose of the moratorium is to facilitate digital trade, prevent revenue loss for countries that are net importers of digital services and products, and support the growth of the digital economy globally.
–India’s stance on digital trade in WTO–
The WTO prohibition on customs duties on electronic transmissions was first introduced at the WTO’s Second Ministerial Conference in 1998 as part of the Global Declaration on E-Commerce.
The purpose of the freeze is to prevent WTO members from imposing customs duties on electronic transmissions, including software, email, text messages, digital music, movies and video games.
The moratorium is reviewed periodically and extended at WTO ministerial conferences every few years.
The last extension took place in June 2022, and is due to expire at the 13th WTO Ministerial Conference in February 2024, unless WTO members decide to make it permanent or extend it temporarily until the next Ministerial Conference.
The purpose of the moratorium is to facilitate digital trade, prevent revenue loss for countries that are net importers of digital services and products, and support the growth of the digital economy globally.
Chip companies lose $35 billion in revenue
The semiconductor industry faces significant challenges, with global semiconductor revenues expected to decline 11% to $534 billion in 2023.
Major players like Intel, Samsung, and Micron have experienced revenue cuts due to falling demand and high inventory, with Samsung’s memory chip division alone reporting a loss of $3.4 billion in the first quarter of 2023.
The memory market, especially DRAM and NAND chips, saw a significant decline in revenue in 2023, with memory products seeing a 37% decline.
Despite these challenges, semiconductor revenues are expected to bounce back in 2024 due to increasing demand for chips supporting AI workloads and a recovery in the memory market.
The semiconductor industry is closely monitoring market dynamics and adjusting strategies to deal with these turbulent times.
